Pre-Designed Software licenses supplied as computer software will be supply of goods: AAR

The Applicant is a Private Limited Company, registered under the Goods and Services Act, 2017. They submit that they are engaged in the supply of scientific & technical equipment and time-based & perpetual software license(s) to Public Funded Research Institutions registered with the Government of India. The applicant has sought an advance ruling in respect of the following questions:

a) Whether software licenses supplied by the applicant qualifies to be treated as computer software resulting in the supply of goods and are therefore to be classified under Chapter Heading 8523 80 20?

b) Whether the benefits of Notifications No. 45/2017-Central Tax (Rate), Notification (45/2017) No. FD48 CSL 2017, Bengaluru, and Notification No. 47/2017-IGST (Rate) all dated 14.11.2017 are applicable to the software licenses supplied by the Applicant to the institutions given in the notification?

Advance Ruling

a) In view of the above, the issue before us to decide is the classification of the supply of software license by the applicant i.e. whether it amounts to the supply of goods or services. We observe that the software supplied by the applicant is a pre-developed or pre-designed software and made available through the use of encryption keys and hence it satisfies all the conditions that are required to be satisfied to cover them under the definition of ‘goods’. Further, the goods which are supplied by the applicant cannot be used without the aid of the computer and has to be loaded on a computer and then after activation would become usable and hence the goods supplied qualifies to be “Computer Software” and more specifically covered under “Application Software”. Further, the Explanatory Notes to the Scheme of Classification of Services stipulates that the SAC 997331 covers Licensing services for the right to use computer software and databases but excludes the services of limited end-user license as part of packaged software from the said SAC. Hence the supply made by the applicant is covered under “Supply of goods” and the said supply is covered under tariff heading 8523.

The software supplied by the applicant qualifies to be treated as Computer Software resulting in the supply of goods and is therefore be classified under Chapter Heading 8523 80 20.

b) The benefits of Notifications No. 45/2017-Central Tax (Rate), Notification (45/2017), No. FD48 CSL 2017, Bengaluru and Notification No. 47/2017- IGST (Rate) all dated 14.11.2017 are applicable to the computer software supplied by the Applicant to the institutions given in the notification, subject to fulfillment of the conditions of the notification, in each case.