The Indian tax system today was conceptualized during British rule. However, there were so many intricacies in its structure because of the presence of several types of taxes in India. Nonetheless, after the post-independence period, things took a major turn with several changes in the tax structure wherein numerous taxes were abolished and only important ones remained. Now, the two main structures are direct and indirect taxes.
Types of Taxes in India
Direct Tax
Direct taxes are imposed on individuals and corporate entities. Furthermore, these taxes are non-transferable. The most important kind of direct tax is the income tax, which is levied during each assessment year on people’s income or their profits. Direct taxes examples include the following:
Income Tax
A tax is directly imposed on the taxpayer’s yearly income if their income falls under the tax brackets instituted by the government.
Corporate Tax
Companies and organizations in India have to pay a direct tax to the government. Moreover, corporate taxes are collected at a flat rate on a company’s net profit in the relevant fiscal year.
A direct tax levied on the purchase and sale of equity securities listed on recognized stock exchanges.
Indirect Tax
Indirect taxes are levied on goods and services consumption. It’s not levied directly on a person’s income. Rather, individuals have to pay tax along with the price of goods or services bought by the seller. The person who has to pay the government and the person who bears the liability to pay tax are, therefore, two different people. Indirect taxes include the following:
Service Tax
Charged on services availed by a customer. If, for instance, you book a hotel accommodation, you will be charged a service tax on the amount of your hotel booking.
Tax paid on the value addition in price upon the sale of goods. One example is a wholesaler selling goods to a retailer.
Excise Duty
Paid for goods manufacture. For instance, if you manufacture a car, you’re liable to pay excise duty on manufactured cars.
Entertainment Tax
Levied on every transaction related to entertainment. Some examples include movie tickets, stage shows, exhibitions, sports-related activities, exhibitions, and so on.
Custom Duty
Paid on imported goods.
Stamp Duty
Paid on the sale of immovable property. Furthermore, it’s mandatory on all kinds of legal documents.
Introducing GST in India
2017 was the year that the GST in India was first introduced. GST, or Goods and Service Tax is levied at every point of sale. The framework incorporates different indirect taxes, including excise duty, VAT, and service tax. It reduces the tax burden and promotes simplicity. As a remarkable reform, it holds numerous benefits for businesses and the general public in the country.
The entire GST process, from registration to filing returns is made online and is pretty straightforward. This has been particularly beneficial to startups, since they need not run from pillar to post to get various registrations, including excise, tax, VAT, and service tax.
Tax Structure in India
India’s tax structure consists of the following:
Central Government
State Governments
Local Municipal Bodies
The Indian Constitution states that no tax shall be collected or levied except by law. Moreover, taxes are determined by the central and state governments, together with local authorities, including municipal corporations. Unless passed by law, the government cannot impose any tax.
Direct and Indirect Taxation Benefits
Benefits of Direct Taxes
Promotes certainty. The annual tax is the same every year as long as there is no change in the salary.
Promotes flexibility. Taxes are government earnings and when they fluctuate, earnings also change. They either go higher or lower.
Saves time and money. Some companies use automatic payroll deduction systems, saving both time and money.
Benefits of Indirect Taxes
Convenient to collect. The service provider or seller can collect it directly at their store, making it convenient for the government. They’re primarily nominal charges included in the prices of goods and services.
Default tax payment. Indirect taxes often are included in most products and services consumed by people; thus, everyone has to pay them.
Digital collection. With the growing popularity of e-payment methods to purchase goods and services, collecting indirect taxes has become easier. They’re auto-filled by e-payment platforms.
Conclusion
There are several views about the imposition or non-imposition of the India Taxation system. The benefits from paying taxes will not be instantaneous but a gradual process where privileges will be experienced in the long term. The tax structure has been modified several times which has significantly enhanced the ability of the common people to understand these laws, bringing about tax payment ease, enhanced law enforcement, and better compliance.
FAQs
What is the GST all about?
GST is an extensive indirect tax levied on manufacturing, selling, and consuming goods and services at the national level.
Can you tell me the difference between direct and indirect tax?
Direct tax is directly paid by a person or an organization. An indirect tax basically is a tax that can be passed on to another individual or entity.
Does India provide a double taxation relief?
This is offered to individuals charged with taxes on the same source of income in India and a different country. This is allowed under Section 91 of the Income Tax Act.
What does PAN mean?
A Permanent Account Number or PAN is a ten-digit number issued by the Income Tax Department and is a unique number assigned to every taxpaying person or organization.
What is the Indian GST rate?
The GST rates in India for different goods and services are divided into four slabs. These include 5 percent GST, 12 percent GST, 18 percent GST, and 28 percent GST.
In the new regime, is the standard salary deduction available?
Yes, a standard Rs 75,000 deduction is available to taxpayers. Thus, a salaried taxpayer is not required to pay any tax if his/her income is less than or equal to Rs.12.75 lakh.
TABLE OF CONTENTS
Introduction
The Top Accounting Software in 2025
The Importance of an Accounting Software
Real-Time Financial Insights
Seamless Financial Processes
Efficient Accounts Receivable and Payable Management
Conclusion
FAQs
Introduction
The finance and accounting landscape is no stranger to the emerging online workforce management software vendors, applications, and platforms. Together with the readily accessible learning management systems, accounting software is prevalent in today’s market, ready to cater to all kinds of businesses, managers, accountants, and decision-makers. There is a plethora of free accounting software for students in the finance and accounting field to learn to easily maneuver an increasingly data-driven, digital world.
The Top Accounting Software in 2025
1. QuickBooks
For students, there are several software considered as the best accounting software for beginners. QuickBooks is one of them and is even considered a small business accounting software, which means that it’s an effective tool for managing the finance requirements of small businesses. Furthermore, it’s a cloud-based accounting software that caters to small to medium-sized businesses, self-employed individuals, and so on.
Some Key Features
Sync apps and organize bills for seamless cash flow management.
Generate and protect estimates, insights, and reports easily.
Boost operations with an automatic GPS mileage tracking and inventory calculator.
Payment management with same-day direct deposits.
2. Go GST
The GST billing software in India is a widely used and most trusted online billing software today. Beautiful, faster, and error-free invoice creation is the specialty of this tool. Simple yet powerful, it helps owners control their business activities in one place.
Some Key Features
Customizable reporting
Seamless invoice generation
Simplified returns filing
Customer management
3. Tally ERP 9
Tally ERP 9 for small and medium businesses helps to efficiently manage processes. For more than three decades now, it’s been used by business owners across India. Moreover, it’s one of the greatest accounting software programs that can be incorporated with other company apps.
How to use ERP Tally? The software can be purchased and downloaded from the Tally website for Windows only. After installation, you can use it and navigate using the keyboard and start to program it or create your company. You will be guided by the tool as you go along.
Some Key Features
Inventory Management
Accounting functionality
Scalability
Remote access
4. NetSuite
A cloud-based accounting software for small businesses, NetSuite offers a suite of ERP apps, HR processes, omnichannel commerce, and a whole lot more. The tool aims to simplify all accounting processes in one place and generate data in real time. Moreover, it presents opportunities not just for small businesses but for startups, family-owned businesses, and mid-sized businesses as well.
Some Key Features
The enhanced accounts receivable tools accelerate processes.
Avoid late fees and save time on accounts payable.
Get 360 visibility and cash management optimization.
Organize both local and global tax management details.
5. FreshBooks
It’s considered the best accounting software for sole traders, startups, and even high-growth businesses. Designed by a four-person design company that wants to streamline the accounting process for small business owners, the platform provides real-time, on-the-go accounting tools. The features are great for basic and advanced accounting and sync data across devices.
Some Key Features
Accurately monitor expenses and receipts using an expense tracking module.
Directly receive payments and record them easily with automation.
Easily collaborate with clients for maximum productivity.
6. Sage Intacct
Is a cloud-based accounting software designed to meet the needs of modern business organizations. It has won several awards and topped the charts when it comes to customer satisfaction. An advanced financial and accounting management software, it offers a comprehensive set of tools. Moreover, the software empowers businesses of all sizes to streamline their processes and optimize performance.
Some Key Features
Quote-and-order-to-cash and set up daily cash transaction cycles.
Shortens accounts payable processing time using automation.
Easily comply with tax requirements using its Intacct Multi-tax.
Streamlines general ledger tasks using the Intelligent GL powered by Artificial Intelligence.
7. Xero
Another web-based accounting software for small business makes everyday business seamless by automating manual tasks, creating a collaboration space effectively, and updating records. Moreover, the platform allows connections to over a thousand third-party applications. Moreover, Xero has specific tools for construction and retail businesses, non-profits, and Amazon sellers.
Some Key Features
Store and schedule online payments and bills via automation.
Keep a record of secured bank feeds anytime.
Bulk bank transactions categorization.
Generate multi-currency reports with a reporting module.
8. TrulySmall Accounting
Developed by Kashoo, the accounting software caters to small businesses, including owner-operators, freelancers, and contractors, claiming to ‘do the heavy lifting’ for users via automation. Moreover, it boasts an easy-to-learn platform with its Smart Inbox feature resembling an email inbox interface.
Some Key Features
Track payments and invoices with the free app TrulySmall Invoices.
Set up multi-currency support easily to view reports with multi-conversions.
Safe store and manage data with a double-entry ledger.
Stay updated with real-time sales and sales tax tracking.
9. Oddo Accounting
One of Odoo’s product offerings. It’s a suite of open-source business applications. User-friendly, it’s a cloud-based accounting software for small businesses that’s user-friendly and has a compact interface where everything can be easily accessed. Oddo Accounting encourages paperless transactions by converting files or images to organized lists and using AI to help minimize errors.
Some Key Features
Create error-free reports using AI-powered invoice digitization.
Generate automatic reconciliations using the Smart Reconciliation Tool.
Simplify global transactions using multi-company and multi-currency features.
Unite legal reports and statements and access them from any device.
10. Wave
Another cloud-based accounting software, Wave helps small businesses with its three basic solutions, that are easy to set up and use. Furthermore, the tool enables users to send invoices on the go with one click. Users can switch between manual and automatic billing to ensure that payments are sent on time.
Some Key Features
Integrate unlimited bank accounts for cash expense and income reports organization.
Track communications with every customer with its informative history records.
Generates monthly and yearly reports instantly even on its mobile app.
Share details with unlimited collaborators and control account privileges securely.
The Importance of an Accounting Software
Real-Time Financial Insights
Accounting software provides financial data access in real time, allowing stakeholders to make informed decisions. Moreover, the tool offers deep insight into the financial health of the business.
Seamless Financial Processes
Aside from popular tools Microsoft tools, such as Excel for Accountants, accounting software could help streamline the entire process. Furthermore, the tool can automate many processes, such as bookkeeping, financial reporting, and invoicing, saving time and reducing the possibility of making errors.
Efficient Accounts Receivable and Payable Management
An accounting software facilitates efficient accounts management. This speeds up the cash flow and reduces the risk of missed income opportunities and late payments. Moreover, the tool can significantly boost the financial liquidity of businesses big and small.
Conclusion
Accounting software is an invaluable tool for your business. it’s not just a tool but a business partner that empowers the accounting landscape. Students and business owners alike should be able to choose the right software that aligns with their requirements to boost efficiency.
FAQs
Do I need accounting software?
Even the smallest business uses some form of software, so yes, today’s business needs accounting software.
What’s the best accounting software for sole traders?
There are several tools you can find mentioned above, such as the Xero accounting software.
Can accounting software replace accountants?
While it can automate some tasks, the software is not designed to replace an accountant but serves as an accountant’s partner.
Is using cloud-based accounting software beneficial?
All data is stored on the provider’s servers, offering numerous benefits compared to traditional desktop accounting software.
Should I choose accounting software based on my industry?
In some instances, yes. Certain industries should comply with specific accounting requirements.
E-commerce has transformed the way business is done in India.Much of the growth for the industry has been triggered by an increase in internet and smartphone penetration. The customers are quickly shifting from retail market to online Platforms like Flipcart, Amazon, Snapdeal etc. for their purchase requirements. Similarly, the retail businesses are also shifting from retail market to online platforms. This article discusses about compliances required by entities engaged in e-commerce market.
An e-Commerce operator is a person who owns, operates, or manages a digital/electronic facility for the sale of goods and services. He is responsible for making payments to the e-Commerce participant on such sales.
An e-Commerce participant is a person who sells goods, services, or both through an electronic facility provided by an e-Commerce operator.
Compliances under GST:
Mandatory Registration under GST:
Generally registration requirement under GST arises only once a business entity crosses certain threshold of aggregate turnover.
However, for retails willing to sell their products through online E-Commerce Platforms like Amazon, Flipcart, Snapdeal etc. it is mandatory to get registered under GST irrespective of turnover.
Hence, GST registration has to be obtained before listing of products with these E-Commerce Platforms.
Applicability of TCS:
If the value of goods/services supplied through an e-commerce website is collected by the e-commerce operator, then it is mandatory for every e-commerce operator to collect TCS @ 1% on Net Value of Taxable Outward Supplies (1% IGST for Interstate sales & 0.5% CGST & 0.5% SGST for Intrastate sales) while making payment of such amount to the dealers in accordance with the provisions of per Section 52 of CGST Act, 2017.
Once, TCS Return is filed
The amount of TCS so collected by the operator shall be credited to Electronic Cash Ledger of the dealer. The dealer can utilized this tax credit for making payment of their GST dues.
TCS Return Filing by E-Commerce Operators:
GSTR – 8 is the GST Return required to be filed by every e-Commerce operator who has collected TCS for all the taxable supplies made through it.
The details of taxable supplies and the tax collected at source by the e-commerce operator must be reported in the GSTR-8.
The return in Form GSTR-8 needs to be filed on the GST Portal by 10th of the next month.
Details to be furnished in GSTR-8:
Following details must be furnished by the e-commerce operator in GSTR-8:
1. Details of Supplies attracting TCS:
GSTIN of Supplier (the suppliers’ name gets auto-populated).
The gross value of supplies made and returned to such Supplier by registered as well as unregistered persons;
Enter the amount collected at source under IGST/ CGST/ SGST heads.
2. Amendments to details of supplies attracting TCS:
Enter the correct details against erroneous entries uploaded for any of the previous months in Tile 4- “Amendment to details of Supplies attracting TCS”.
Correction can be made in supplier-wise details related to the particular month and financial year which has been incorrectly uploaded by the e-commerce operator in the earlier period.
Values mentioned against registered vendors and unregistered vendors and TCS deducted against such supplies can be amended.
3. Details of Interest:
View the interest on the delay in payment of the TCS liability, the filing of the TCS return, etc., under “Details of Interest” tile, if any.
4. Payment Details:
After viewing the interest tile, click on the “Payment of Tax” tile to enter the details of taxes paid for that particular month;
Compliance under Income Tax:
TDS Deduction under Section 194O:
Section 194O has been introduced in the Union Budget 2020. According to Section 194O, an e-Commerce operator is required to deduct TDS for facilitating any sale of goods or providing services through an e-Commerce participant.
Accordingly Section 194N, from 1st October 2020, every E-Commerce operator is required to deduct TDS @ 1% at the time of credit of amount of sale of goods/services to the account of an e-commerce participant or at the time of payment thereof to such e-commerce participant by any mode, whichever is earlier.
Threshold Limit:
No TDS shall be deducted by E-commerce operator if the gross amount of sale of goods, services, or both during the previous year does not exceed Rs 5 lakh.
Rate of Deduction:
TDS under section 194O shall be deducted at the rate of 1% where a valid PAN is furnished by the e-commerce participant.
If the e-Commerce participant does not furnish his PAN, TDS must be deducted at the rate of 5%, as per provisions of Section 206AA.
Residential Status of Deductee/Payee:
TDS under this section must be deducted only if the participant is resident in India. No TDS will be deducted if the participant is a non-resident.
TDS on Payment of Dividend on Mutual Fund [Section 194K]:
Budget 2020 introduced Section 194K which proposes a tax deduction on the amount paid on the units of mutual funds, without a limit, to any resident individual. Earlier such income was exempt from Income Tax under section 10(35). Hence,this new section abolished the older section 10(35) of the Income-tax Act, 1961.This section has come into effect from 1st April 2020.
Section 10(35):
The provisions of section 10(35) offer exemption towards the following:
Any income arising in respect of the units of the specified mutual fund; or
Any income arising in respect of the units from the Administrator of the specified undertaking; or
Any income arising in respect of the units from the specified company.
Thus, in case the income falling within the criteria mentioned above, the entire income was exempted under section 10(35) of the Income Tax Act.
However, with the insertion of section 194K,no exemption under section 10(35) would be available to income arising in respect of units received on or after 1st April 2020.
Nature of Income covered under Section 194K:
Provisions of section 194K are applicable only on payment of dividends by fund houses. No TDS shall be deducted on capital gains arising on redemption of units. Provisions of section 194K are applicable to
following incomes:
Units of a Mutual Fund: Mutual fund means units specified under section 10(23D) of the Income Tax Act.
Units from the Administrator: Administrator means the Administrator, as referred under section 2(a) of the Unit Trust of India (Transfer of the Undertaking and Repeal) Act, 2002.
Units from a Specified Company: Specified company means the company as referred under Section 2(h) of the Unit Trust of India (Transfer of the Undertaking and Repeal) Act, 2002.
Liability to Deduct TDS:
The liability to deduct TDS under this section rests on the shoulders of Mutual Fund Houses distributing dividends to the investors. The deductor must deposit the TDS and file the TDS Return on TRACES.
Deductee under this Section:
Shareholder resident in India earning dividend income on equity mutual funds will receive the amount after TDS under Section 194K.
Shareholder resident in India earning dividend income on equity shares will receive the amount after TDS under Section 194.
NRI investors/shareholders, earning dividend income will receive the amount after deduction of TDS under Section 195.
Rate and Threshold Limit for TDS Deduction:
TDS shall be deducted at the rate of 10% on the amount of dividend paid.
If a valid PAN is not furnished by the deductee, TDS shall be deducted at the rate of 20%.
Threshold Limit for TDS deduction is Rs. 5000. This means no TDS shall be deducted if the total dividend paid/payable in a financial year does not exceed Rs. 5000.
TDS on Repurchase of Units by Mutual Fund or Unit Trust of India [Section 194F]:
Section 194F deals with TDS on payment relating to repurchase of units of Mutual Funds or Unit Trust of India.Under this section,liability to deduct TDS arises on payment of such amount as referred to in Section
80CCB of the Acton repurchase of units issued by them.
Nature of Income Covered:
This section becomes applicable at the time of making payment of any amount referred to in referred to in section 80CCB (2).
Section 80CCB(2):
Section 80CCB (2) of the Income Tax Act refers to the amount which is invested by the assessee in the units being issued under a plan formulated under the Equity Linked Savings Scheme.
The amount so invested has been allowed as a deduction, however, the amount invested (whole or part) is returned back to the assessee by the Fund / Trust either by way of repurchase of the units or on the termination of the plan.
Liability to deduct TDS under this Section:
The mutual fund house or the UTI responsible for paying to any person any amount referred to in sub-section (2) of section 80CCB shall is liable to deduct on such amount.
Rate of TDS and Threshold Limit:
TDS shall be deducted at the rate of 20%at the time of payment of amount as referred to in Section 80CCB of the Act. Please note that there is no exemption limit provided under section 194F. This means TDS shall be deducted irrespective of quantum of payment.
TDS on Payment for Deposit under National Savings Scheme (NSS) [Section 194EE]:
National Savings Scheme is a fixed-income investment scheme backed by the Government of India. The savings bond is suitable for small and medium-income investors to save tax while earning returns. This is a secure and
low-risk product. The primary objective of such schemes is to mobilize savings and help individuals build a substantial corpus eventually. The rates of return under such schemes are revised frequently. The fact that this
scheme is backed by the Government makes it a safe investment options and a preferred instrument for millions of small investors across India.
Liability to Deduct TDS:
Section 194EE of the Income Tax Act, 1961 mandates deduction of TDS on withdrawal of amount deposited under the National Saving Scheme. This section states that the person making payment of amount referred to in section
80CCA(2)(a) is required to deduct TDS.
Rate of TDS and Threshold Limit:
The TDS under section 194EE shall be deducted at the rate of 10%.
Exemption from TDS Deduction under this section:
No TDS shall be deducted under section 194EE in following cases:
If the aggregate amount of payments in a financial year does not exceedRs. 2,500.
Where the payment is made to the heirs of the deceased assessee (depositor), no tax shall be deducted at source.
If a declaration is submitted under section 197A by the recipient to the payer, then no tax is deductible.
Extract of Section 194EE of Income Tax Act, 1961
194EE. The person responsible for paying to any person any amount referred to in clause (a) of sub-section (2) of section 80CCA shall, at the time of payment thereof, deduct income-tax thereon at the rate of ten per cent :
Provided that no deduction shall be made under this section where the amount of such payment or, as the case may be, the aggregate amount of such payments to the payee during the financial year is less than two thousand five hundred rupees :
Provided further that nothing contained in this section shall apply to the payment of the said amount to the heirs of the assessee.
The Goods and Services Tax (GST) Council’s 47th meeting was held on June 28-29, 2022 under the chairmanship of the Finance Minister Nirmala Sitharaman and made several recommendations to implement changes to the GST regime.
Key Changes in the GST Rates for Goods, w.e.f. July 18, 2022:
Goods
Existing GST rate
Proposed GST Rate
Printing, writing, or drawing ink
12%
18%
Power-driven pumps primarily designed for handling water. For example, centrifugal pumps, deep tube-well turbine
pumps, submersible pumps, and bicycle pumps
12%
18%
LED lamps, lights and fixture, and their metal printed circuits board
Orthopedic appliances − splints and other fracture appliances, artificial parts of the body, or other appliances that
are worn or carried, or implanted in the body to compensate for a defect or disability, intraocular lens
12%
5%
Ostomy appliances
12%
5%
Tetra packs (aseptic packaging paper)
12%
18%
Cut and polished diamonds
0.25%
1.5%
IGST on specified defense items imported by private entities or vendors, when end-user is the defense forces of India
Applicable Rate
Nil
Cheques, lose or in book form
Nil
18%
Petroleum/coal bed methane
5%
12%
E-waste
5%
18%
Maps and hydrographic or similar charts of all kinds, including atlases, wall maps, topographical plans and globes
Nil
12%
Withdrawal of Exemption in case of Services:
1
Transportation by rail or vessel of railway equipment and material.
2
Storage or warehousing of commodities which attract tax (nuts, spices, copra, jaggery, cotton etc.)
3
Fumigation in a warehouse of agricultural produce.
4
Services by Reserve Bank of India (RBI), Insurance Regulatory and Development Authority (IRDA), Securities and Exchange Board of India (SEBI), Food Safety and Standards Authority of India (FSSAI) and Goods and Services Tax Network (GSTN).
5
Renting of residential dwelling to registered business entities.
6
Services provided by cord blood banks by way of preservation of stem cells.
7
Common bio-medical waste treatment facilities for treatment or disposal of biomedical waste shall be taxed at 12 percent with ITC benefit.
8
Hotel accommodation of value up to INR 1000 per day shall be taxed at 12 percent.
9
Room rent (excluding ICU) charged by a hospital, exceeding INR 5,000 per day per patient shall be taxed. The tax shall be levied only on the room rentals at five percent without ITC.
10
GST exemption on training or coaching in recreational activities relating to arts, culture or sports is restricted only when supplied by an individual.
Change in GST Rate for Services:
Goods
Existing GST rate
Proposed GST Rate
Services supplied by foreman to chit fund
12%
18%
Job work in relation to processing of hides, skins and leather
5%
17%
Job work in relation to manufacture of leather goods and footwear
5%
12%
Job work in relation to manufacture of clay bricks
5%
12%
Works contract for roads, bridges, railways, metro, effluent treatment plant etc.
12%
18%
Works contract service supplied to Central and State governments, local authorities for historical monuments, canals, dams, pipelines, plants for water supply, educational institutions, hospitals etc. and its sub-contracting
12%
18%
Works contract service supplied to Central and State governments and local authorities involving predominantly earthwork and its sub-contracting
5%
12%
Transport of goods and passengers by ropeways
18%
5% (with ITR for services)
Renting of truck/ goods carriage where cost of fuel is included
18%
12%
Secretarial audit is a mandatory compliance which has to be carried out by certain companies in India. The main law that regulates secretarial audit in India is the Companies Act, 2013. Under section 204(1), companies are required to obtain a secretarial audit report from the secretarial auditor. Such provision has to be read with rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014.
The Secretarial Audit is an audit where the Secretarial Auditor expresses an opinion as to whether there subsist appropriate systems and processes in the company proportionate with the size and operations of the company to monitor and check compliance with applicable laws, rules, regulations, and guidelines. In this article we will discuss some of the key features of Secretarial Audit.
Applicability of Secretarial Audit:
As per section 204(1) read with rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the following companies require to carry out secretarial audit:
Every Listed Company; and
Every Public Company:
Having a paid-up share capital of 50 crore rupees or more. Or
Having a turnover of more than Rs. 250 crore or more.
Every company having a borrowing of 100 crores or more. Note: If a private company is a subsidiary of a public company, then secretarial audit would be carried out as per the requirements of the public company.
Procedure of the Secretarial Audit:
The below steps must be carried out in process of conducting Secretarial Audit:
Appointment of Secretarial Auditor;
Communication to earlier Incumbent;
Acceptance of Appointment by the Secretarial Auditor;
Preliminary Discussions about the company with the Secretarial Auditor;
Preliminary Meeting with the Auditor;
Finalization of Audit plan and briefing the staff;
Testing, Interview and Analysis;
Preparing the working papers;
Audit Summary for Discussions;
Submission of Secretarial Audit Report.
Eligibility of Secretarial Auditor:
Members of the ICSI (Institute of Company Secretaries of India), who are holding the certificate of practice which validates to perform as a secretarial audit, can only conduct Secretarial Audit and prepare the Secretarial Audit Report of the Company.
Appointment of Secretarial Auditor:
Obtain the consent of secretarial Auditor.
File certified true copy of a resolution passed in Board Meeting with the Registrar of Companies as an attachment in MGT– 14.
Appoint the Secretarial Audit in Board Meeting.
Fix the remuneration in Board Meeting.
Statutory Laws covered under the Scope of Secretarial Audit:
Following Statutory laws are covered under the scope of Secretarial Audit:
Companies Act, 2013 and the rules made thereunder.
Securities Contracts (Regulation) Act, 1956 (‘SCRA’), and the rules made thereunder.
Depositories Act, 1996, and the rules made thereunder.
Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder to the extent of Foreign Direct Investment, Overseas Direct Investment, and External Commercial Borrowings.
Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’).
Reporting on the compliance of secretarial standards issued by the Institute of Company Secretaries of India.
Reporting on Compliances with the Listing Agreement.
Reporting on compliance of ‘Other laws as may be applicable specifically to the company which shall include all the laws which are applicable to specific industry for example for Banks- all laws applicable to Banking Industry; for insurance company-all laws applicable to insurance industry; likewise for a company in petroleum sector- all laws applicable to petroleum industry; similarly for companies in pharmaceutical sector, cement industry etc.
Examines and reports regarding the adequacy and efficiency of the systems and processes with other laws.
Monitor and ensure compliance with general laws like labor laws, competition law, and environmental laws.
Examines and reports on the specific observations or qualification, reservation or adverse remarks in respect of the Board Structures/system and processes relating to the Audit period.
Secretarial Auditor may rely on reports given by statutory auditors or other designated professionals to check compliance with other laws like Income Tax, Customs, GST.
Document Checklist for Secretarial Audit:
Verification of the following documents/registers/reports fall under the scope of Secretarial Audit:
Notice, agenda, notes on agenda minutes of meetings, attendance registers;
Draft Financial Statements, Auditor’s Report, Director’s Report;
Statements for borrowings and investments;
Disclosures / Consents / Declarations;
Filings with RoC / Regulatory Authorities / RBI;
Filings / submissions to Stock Exchanges;
Relevant Approvals/correspondence/disclosures by directors;
Compliance Certificates of functional heads for compliance of applicable laws;
Charter Documents and Statutory Registers;
Annual Performance Reports, Lease Deed, Bonds and returns;
Registers maintained under Labour Laws;
Admission and Statement for code of conduct received from the directors;
Remuneration and Sitting fees details paid to directors;
Particulars of CSR amount;
SAST Disclosures;
Bank account details for dividend;
Details of ECB Returns, in case of foreign borrowings in the company.
Secretarial Audit Report:
Just like the Independent Auditors’ Report, the Secretarial Audit Report is also to be addressed to the Members. There are two types of reports to be submitted as a part of secretarial audit as follows:
1. Secretarial Audit Report:
Every listed entity and its material unlisted subsidiaries incorporated in India shall undertake secretarial audit and shall annex with its annual report, a secretarial audit report, given by a company secretary in practice, in such form as may be prescribed with effect from the year ended March 31, 2019.
The said report shall be submitted in the Form MR-3.
2. Secretarial Compliance Report:
This report is to be submitted in addition to the Secretarial Audit Report.
All listed companies to submit, in addition to Secretarial Audit Report, Secretarial Compliance Report to the stock exchanges within 60 days of closure of financial year.
This report is a feeder to SAR.
SCR applied only to Listed Entities (Not applicable to Material Unlisted Subsidiary).
Note: “Material Unlisted Subsidiary” means a subsidiary of a listed company whose income or net worth exceeds 10 % of the consolidated income or net worth, respectively, of the Company and its Subsidiaries in the immediately preceding accounting year.
Frauds and Penalties:
Section 448:
Section 448 of Companies Act 2013, deals with the penalty for false statements.
The section provides that if in any return, report, certificate, financial statement, prospectus, statement or other document required by, or for the purposes of any of the provisions of this Act or the rules made thereunder, any person makes a statement –
Which is false in any material particulars, knowing it to be false; or
Which omits any material fact, knowing it to be material, he shall be liable under section 447.
In Terms Of Section 448, a PCS is liable to attract penal provision if, he makes statement in the Secretarial Audit Report which is false is any material particulars, knowing it be false or omits any material fact knowing it to be material.
Section 447:
Section 447 deals with Punishment for Fraud.
It provides that any person who is found to be guilty of fraud, shall be punishable with imprisonment for a term which
Punishment for Defaulter:
If a company or any officer of the company or the company secretary in practice, contravenes the provisions of this secretarial audit, then –
.The company, or
.Every officer of the company, or
.The company secretary in practice,
…who is in default, shall be punishable with:
Minimum fine of Rs. 1 lakh which may extend up to Rs. 5 lakh.
Cost Audit is the verification of cost accounts to determine the accuracy of cost accounting records. Cost audit ascertains the accuracy of cost accounting records to ensure that they are in conformity with cost accounting principles, plans, procedures and objectives.
A cost audit comprises the following:
Verification of the cost accounting records such as the accuracy of the cost accounts, cost reports, cost statements, cost data and costing technique.
Examination of these records to ensure that they adhere to the cost accounting principles, plans, procedures and objective.
To report to the government on optimum utilization of national resources.
Objectives of Cost Audit:
Prospective Objective: Under which cost audit aims to identify the undue wastage or losses and ensure that costing system determines the correct and realistic cost of production.
Constructive Objectives: Cost audit provides useful information to the management regarding regulating production, economical method of operation, reducing cost of operation and reformulating cost accounting plans.Relevant Definitions:
Cost Audit:
Cost Audit is a system of audit introduced by the Government of India for the review, examination and appraisal of the cost accounting records and attendant information required to be maintained by specified industries.
If the Central Government is of the opinion, that it is necessary to do so, it may, by order, direct that the audit of cost records of class of companies, which are covered under sub-section (1) and which have a net worth of such amount as may be prescribed or a turnover of such amount as may be prescribed, shall be conducted in the manner specified in the order.
Cost Accountant:
Cost Accountant means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 and who holds a valid certificate of practice under sub-section (1) of section 6 of that Act.
Cost Accountant in Practice:
Cost Accountant in practice means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 (23 of 1959), who holds a valid certificate of practice under sub-section (1) of section 6 of that Act and who is deemed to be in practice under sub-section (2) of section 2 thereof, and includes a firm or limited liability partnership of cost accountants.
Cost Auditor:
Cost auditor means a Cost Accountant in practice, as defined in clause (b), who is appointed by the Board.
Cost Audit Report:
Cost audit report means the duly signed cost auditor’s report on the cost records examined and cost statements which are prepared as per these rules, including attachment, annexure, qualifications or observations attached with or included in such report.
Cost Records:
The definition of the word ‘cost records’ has been provided under rule 2 (e) of the Companies (Cost Records and Audit) Rules, 2014 which means books of account relating to the utilization of materials, labour and other items of cost as applicable to the production of the goods or provision of services as provided in section 148 of the Act and the Companies (Cost Records and Audit) Rules.
Relevant Provisions under the Companies Act, 2013:
Section 148 of the Companies Act, 2013:
Section 148 of the Companies Act, 2013 contains provisions relating to the cost records and cost audit applicability under the Companies Act.
As per Section 148, Cost Audit shall be conducted by the cost accountant who is appointed by the Board;
Rights of Central Government:
Section 148 (1) empowers the Central Government to direct the companies specified in the production of goods or provisions of service to include particulars relating to utilization of material or labour or other items of cost in the books of accounts of the company;
Section 148 (2) empowers the Central Government to direct, based on the net worth or turnover of the company, audit of cost records of the specified class of companies;
Rule 4 of the Companies (Cost Records and Audit) Rules, 2014:
Rule 4 of the Companies (Cost Records and Audit) Rules, 2014 contains the provisions relating to the companies which are liable to get their cost records audited;
It contains the list of specified companies, which needs to maintain the cost records, is provided under Table A and Table B of rule 3 of the Companies (Cost Records and Audit) Rules, 2014;
Applicability of Maintenance of Cost Records [Rule 3 of the Companies (Cost Records and Audit) Rules, 2014]:
As discussed, the definition of the word ‘cost records’ has been provided under rule 2(e) of the Companies (Cost Records and Audit) Rules, 2014 which means “books of account relating to the utilization of materials, labour and other items of cost as applicable to the production of the goods or provision of services as provided in section 148 of the Act and the Companies (Cost Records and Audit) Rules”.
Rule 3 of the Companies (Cost Records and Audit) Rules, 2014 contains two table namely
Table A – Regulated Sectors; and
Table B – Non-regulated sectors.
Cost records need to be included in the books of accounts of the companies being engaged in the production of goods or provision of service as covered under the table A or Table B and the total turnover from all its production or service in more than INR 35 crore during the preceding financial year.
In a nutshell, cost records are mandatory in the case following conditions are satisfied:
– The company is engaged in manufacturing goods or provision of services which are listed in Table A or Table B; and
– Total aggregate turnover of the company from all its production or service is more than INR 35 Crore in the preceding financial year.
Applicability of Cost Audit [Section 148(2) & Rule 4 of Companies (Cost Records and Audit) Rules, 2014]:
CG may direct to conduct audit of cost records of such class of companies having turnover or net worth as may be prescribed.
According to Rule 4 of Companies (Cost Records and Audit) Rules, 2014, Cost Audit shall be applicable to following companies:
Turnover
Every company specified under Rule 3A in Regulated Sector
Every Company specified under Rule 3B in Non-Regulated Sector
Turnover from all products and services:
Rs. 50 Crore or more
Rs. 100 Crore or more
Turnover from individual products or services specified for cost records under Rule 3:
Rs. 25 Crore or more
Rs. 35 Crore of more
Non-Applicability of Cost Audit:
Cost Audit shall not be applicable in case of following companies:
The company’s export revenue exceeds 75% of its total revenue. The export revenue needs to be in foreign exchange; or
The company which is operating from the special economic zone;
The company which is engaged in the generation of electricity for captive consumption through Captive Generating Plant*.
*Note: The term ‘Captive Generating Plant’ shall have the same meaning as assigned to it in Rule 3 of the Electricity Rules, 2005.
Eligibility of a Cost Auditor:
Only a Cost Accountant can be appointed as Cost Auditor for conducting cost audit. ‘Cost Accountant’ means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 and who holds a valid certificate of practice under sub-section (1) of section 6 of that Act.
From the above definition we can say that only a member of the Institute of Cost Accountants of India who has a valid certificate of practice can be appointed as Cost Auditor. Such member may be:
An Individual who is a Cost Accountant in Practice;
A Firm of Cost Accountants in practice.
Provided that no person appointed statutory auditor of the company shall be appointed for conducting the audit of cost records.
Appointment of Cost Auditor:
Cost Auditor shall be appointed by the Board within 180 days from the commencement of financial year.
Consent must be obtained from the cost auditor for conducting the Cost Audit.
After obtaining the consent, a Board Meeting should be held for the appointment of Cost Auditor.
Pass the Resolution at the Board Meeting and file the Form with ROC within 30 days or within a period of 180 days of the commencement of the financial year.
Form CRA-2:
Every company appointing the Cost Auditor must file a notice of such appointment through electronic mode in Form CRA-2 within a period of:
30 days of the Board Meeting in which such appointment is made or
Within a period of 180 days of the commencement of the financial year, whichever is earlier,
Submission of Cost Audit Report:
A cost auditor is required to submit his audit report along with his/ her qualifications, reservations, observations or suggestions if any, in form CRA-3 to Board of Directors of the Company within 180 days from the closure of financial year to which the report relates.
The Audit Report shall be filed with the Central Government within 30 days from the date of receipt of the Audit Report.
Relevant Forms:
Form
Details
Time Limit
CRA-1
Format of Cost Audit Records
Not Applicable
CRA-2
Appointment of Cost Auditor
30 days of the Board meeting in which such appointment is made or within a period of 180 days of the commencement of the financial year
CRA-3
Format of Cost Audit Report
Not Applicable
CRA-4
Submission of Cost Audit Report
30 days of receipt
Penalty in case of Default in compliance with above provisions:
Default on part of Company:
In case of Company
In case of Officer of the Company
In case of any default on the part of the company, it shall be punishable with the fine of an amount not less than INR 25,000, however, such fine cannot be more than INR 5 Lakhs.
every officer, in default, of the company shall be punishable with imprisonment for a term up to 1 year or with the fine not less than INR 10,000, however, the same cannot be more than INR 1,00,000;
Default on part of Cost Auditor: In case the cost auditor is in default, he shall be punishable in the manner as provided under section 147 (2) to section 147 (4).
Section 194C of the Income Tax Act, 1961 deals with the provisions related to deduction of TDS at the time of payment to contractors/sub-contractors. According to this section any person making payment to the resident contractor (or subcontractor) for carrying out any contract (including the supply of labor) is required to deduct tax on such payment.
Meaning of Contractor:
A contractor is a resident person, who is engaged in carrying out any ‘work’, including the supply of labor, on account of a contract entered by him with ‘Specified Person’.
The specified person is required to deduct TDS at the time of making payment to the contractor.
Meaning of Sub-Contractor:
A sub-contractor is a resident person who has entered into a contract with the contractor for carrying out such ‘work’, which the contractor has agreed to complete as a part of his contract with the specified person.
The sub-contractor might have entered into a contract with the contractor for following:
Conducting either all or part of work, which the contractor has agreed to complete.
Supplying manpower for all or part of work taken by the contractor.
Specified Person:
Specified Person for the purpose of this Section include following persons:
The Central or State Government;
The local authority;
The Corporation established by the Central, State or Provincial Act;
The Company;
The Trust;
The Co-operative Society;
The Registered Society;
The authority engaged either for the purpose of dealing with and satisfying the need for the housing accommodation or for planning, improvement or development of cities, town and village;
The university established / incorporated by Central, State or Provincial Act;
The firm;
The Government of a foreign state / a foreign enterprise or any association / body established outside India;
The individual or HUF liable to audit under section 44AB [Clause (a) or Clause (b)] during the financial year immediately preceding the financial year in which the sum is credited or paid to the account of the contractor.
Meaning of the term ‘Work’:
For the purpose of this Section, the term ‘Work’ includes following activities:
Advertising;
Carriage of goods / passengers by any mode of transport except railway;
Broadcasting and telecasting (which also includes the production of programmes for such broadcasting or telecasting);
Catering;
Manufacturing / supplying a product based on the requirement and specification of customers by using material purchased from the customer. However, it doesn’t include when the material is purchased from any person other than the customer.
Rate of TDS Deduction u/s 194C:
TDS u/s 194C shall be deducted at following rates:
Contractor/Sub-Contractor
Rate of TDS (if PAN available)
Rate of TDS (if PAN not available)
Payment to Resident Individual/HUF
1%
20%
Payment to:
Trust;
Company,
Firm;
Cooperative Society;
Registered Society;
Government, Local Authority;
University, Cooperation.
2%
20%
Threshold Limit for TDS Deduction:
1. Threshold limit is the maximum amount of payment till which TDS is not applicable. If the amount of payment in a financial year exceeds such maximum limit, there shall be a deduction of TDS.
Particulars
Threshold Limit
Single Payment to a Contractor
Rs. 30,000
Aggregate Payment to a contractor during a Financial Year
Rs. 1,00,000
TDS Deduction in case of Customized Products:
2. Many a times, a product is manufactured by the contractor as per the specifications provided by the customer. Similarly, the material used for such manufacture is also purchased from the customer himself. In such a case the amount of TDS u/s 194C to be deducted shall be computed on following value:
Scenario
TDS to be computed on Value
Where price of material and service charges are indicated separately in the Invoice by the contractor.
Invoice value excluding the value of material
Where price of material and service charges are not indicated separately but a lump sum amount is charged by the contractor in the Invoice.
Total Invoice Value
Applicability of Section 194C to Transport Business:
3. There are two types of transport businesses namely:
Passenger Transport
Goods Carriage Transport
4. Under Section 194C(6), TDS deduction is not required in case payment is made to a goods transport agency (in the business of plying, hiring or leasing goods) which owns 10 or fewer carriages at any time during the previous year. However, the contractor has to submit a declaration of above along with PAN.
5. Such exemption is not allowed to a goods transport agency which owns more than 10 trucks at any time during the year.
6. Similarly, this benefit is only for Goods Carriage Transport. Passenger transport businesses do not enjoy any such exemption.
Nature of Transport Business
Rate of TDS (if PAN available)
Rate of TDS (if PAN not available)
Individual/HUF
Others
Passenger Transport
(irrespective of number of vehicles owned)
1%
2%
20%
Goods Transport
Owning up to 10 carriages at any time during the FY.
Nil*
Nil*
20%**
Owning more than 10 carriages at any time during the FY.
1%
2%
20%
Goods Transport Contractor not owning any carriages (all carriages are hired/sub-contracted.)1
1%
2%
20%
* Declaration must be furnished along with copy of PAN Card.
**No Declaration can be furnished in absence of PAN.
Note:
1. When a person undertakes any transportation contract who does not own any truck or goods carriage and arranges trucks from other truck owners he cannot be said to be a person engaged in the business of transport i.e. plying, hiring or leasing goods carriage and he is also not eligible to compute income as per the provisions of section 44AE. In this case even if such a person gives a declaration of owning less than 10 trucks (zero number of trucks), he will not be given the benefit of non-deduction of TDS under section 194C(6).
Other Important Points:
FD Commission and brokerage are not covered under section 194C.
Payment made to an electrician or payment made to a contractor for providing electrician service is covered under section 194C.
Payment made to courier covered under section 194C.
Payment made to travel agent or an airline for purchase of a ticket is not subjected to TDS under section 194C. However, if the plane, bus or any other mode is chartered, then TDS is liable to be deducted under section 194C.
Payment made to clearing and forwarding agents for the carriage of goods is liable to TDS under section 194C.
Time Limit to deposit TDS:
• TDS deducted is required to be deposited to the credit of the Government within given below timeline to avoid interest:
Month of Deduction
Due date of deposit of TDS
During any month from April to February
7th of Subsequent Month
During the month of March
30th April
TDS Return Filing Due Date:
Quarter
TDS Return Filing Due Date
Q1: April to June
31st July
Q2: July to September
31st October
Q3: October to December
31st January
Q4: January to March
31st May
TDS Certificate (For 16A):
Quarter
TDS Return Filing Due Date
Q1: April to June
15th August
Q2: July to September
15th November
Q3: October to December
15th February
Q4: January to March
15th June
Interest on Late Filing:
Section
Nature of Default
Interest Payable
Period for which interest is to be paid
201A
Non deduction of tax at source, either in whole or in part
1% per month or part thereof
From the date on which tax deductible to the date on which tax is actually deducted.
After deduction of tax, Non-payment of tax either in whole or in part
1.5% per month or part thereof
From the date of deduction to the date of payment.
Notes:
The above interest should be paid before filing of TDS return. The deductor can make the payment of interest on such late payment of TDS before filing TDS returns or demand raised by TRACES.
The interest paid u/s 201A is not allowed as an expense under the Income Tax provisions.
Interest to be calculated on a monthly basis and not on the number of days i.e. part of a month is considered as a full month.
Penalty for late filing of TDS Returns:
Section 234E:
The deductor will be liable to pay by way of fees Rs.200 per day till the failure to pay TDS continues.
However, the penalty should not exceed the amount of TDS for which the statement was required to be filed.
Section 271H:
Also, a penalty from Rs.10,000 to Rs.1 lakh is leviable under Section 271H if a company provides incorrect information or fails to submit the returns within the specified due date.
This penalty will be charged in addition to the penalty under Section 234E.
No penalty under Section 271H will be charged in case of delay in filing the TDS/TCS return if the following conditions are satisfied:
i. The tax deducted/collected at source is paid to the credit of the government.
ii. Late filing fees and interest (if any) is paid to the credit of the government.
iii. The TDS/TCS return is filed before the expiry of a period of one year from the due date specified in this behalf.
As per the IGST law, import of services under GST applies when the trade occurs in inter-state. It also applies when the consumer receives the services from a person residing outside India. Those importing services on a regular basis shall enhance the impact of GST on their business, as GST applies to imported services. However, in this article we will focus on issues like import of software and whether software is considered as service or goods and tax implications of import of software.
Generally, organizations enter into licensing agreements under which software is imported for using the same for business purposes. There are generally two ways of importing the software either by downloading it electronically or by loading it on CD.
Import of Service (Section 2(11) of the IGST Act):
Import of services means the supply of any service where –
The supplier of service is located outside India;
The recipient of service is located in India; and
The place of supply of service is in India.
As per Section 7(4) of the IGST Act, 2017:
“Supply of services imported into the territory of India shall be treated to be supply of service in the course of inter-state trade or commerce.”
If the services are covered within the scope of ‘import of service’ then tax would be payable by the recipient of service under GST as per Notification No-10/2017 IGST (Rate) dated 28th June, 2017.
Software as Service:
In terms of Schedule II of the CGST Act 2017, development, design, programming, customization, adaptation, up gradation, enhancement, implementation of information technology software and temporary transfer or permitting the use or enjoyment of any intellectual property rights are treated as services.
For the software downloaded directly from the website or made available through any electronic medium, then study of following provision is required:
As per Entry No 5(h) of Schedule-II to CGST Act, 2017, temporary transfer or permitting the use or enjoyment of any intellectual property right shall be treated as supply of Service, thus software is covered under the above entry specifically.
Then, import of software from outside India will be considered as Import of Service, further definition of same is extracted thereafter.
Software as Goods:
If a pre-developed or pre-designed software is supplied in any medium/storage (commonly bought off-the-shelf) or made available through the use of encryption keys, the same is treated as a supply of goods classifiable under heading 8523.
If supply of software in the physical form (i.e. CD, DVD Packages) of Information Technology Software (branded as well as tailor-made) shall apply as goods under the Customs Tariff Act with HSN Code 8523 80 20. The GST rate for software sold in physical form is also 18%.
The above stand on software has been clarified and confirmed by various Courts. In the case of Tata Consultancy Services v. State of Andhra Pradesh, it has been held that canned software which is sold in packages or CDs or DVDs or USB Drivers will be classified as goods.
Though the copyright of the program would remain with the development company, the moment copies are made and marketed, it would be termed as goods.
Conclusion:
GST implications for import of software can be understood with the help of following table:
Mode of Importing Software
Nature of Supply
HSN/SAC
GST Rate
Software downloaded directly from the website or made available by way of any electronic medium.
Supply of Service
SAC-99733
18%
Software imported in the form of DVD, CD or pen drive packages.
Supply of Goods
HSN-8523 80 20
18%
As per the IGST law, import of services under GST applies when the trade occurs in inter-state. It also applies when the consumer receives the services from a person residing outside India. Those importing services on a regular basis shall enhance the impact of GST on their business, as GST applies to imported services. However, in this article we will focus on issues like import of software and whether software is considered as service or goods and tax implications of import of software.
Generally, organizations enter into licensing agreements under which software is imported for using the same for business purposes. There are generally two ways of importing the software either by downloading it electronically or by loading it on CD.
Import of Service (Section 2(11) of the IGST Act):
Import of services means the supply of any service where –
The supplier of service is located outside India;
The recipient of service is located in India; and
The place of supply of service is in India.
As per Section 7(4) of the IGST Act, 2017:
“Supply of services imported into the territory of India shall be treated to be supply of service in the course of inter-state trade or commerce.”
If the services are covered within the scope of ‘import of service’ then tax would be payable by the recipient of service under GST as per Notification No-10/2017 IGST (Rate) dated 28th June, 2017.
Software as Service:
In terms of Schedule II of the CGST Act 2017, development, design, programming, customization, adaptation, up gradation, enhancement, implementation of information technology software and temporary transfer or permitting the use or enjoyment of any intellectual property rights are treated as services.
For the software downloaded directly from the website or made available through any electronic medium, then study of following provision is required:
As per Entry No 5(h) of Schedule-II to CGST Act, 2017, temporary transfer or permitting the use or enjoyment of any intellectual property right shall be treated as supply of Service, thus software is covered under the above entry specifically.
Then, import of software from outside India will be considered as Import of Service, further definition of same is extracted thereafter.
Software as Goods:
If a pre-developed or pre-designed software is supplied in any medium/storage (commonly bought off-the-shelf) or made available through the use of encryption keys, the same is treated as a supply of goods classifiable under heading 8523.
If supply of software in the physical form (i.e. CD, DVD Packages) of Information Technology Software (branded as well as tailor-made) shall apply as goods under the Customs Tariff Act with HSN Code 8523 80 20. The GST rate for software sold in physical form is also 18%.
The above stand on software has been clarified and confirmed by various Courts. In the case of Tata Consultancy Services v. State of Andhra Pradesh, it has been held that canned software which is sold in packages or CDs or DVDs or USB Drivers will be classified as goods.
Though the copyright of the program would remain with the development company, the moment copies are made and marketed, it would be termed as goods.
Conclusion:
GST implications for import of software can be understood with the help of following table:
Mode of Importing Software
Nature of Supply
HSN/SAC
GST Rate
Software downloaded directly from the website or made available by way of any electronic medium.
Supply of Service
SAC-99733
18%
Software imported in the form of DVD, CD or pen drive packages.
Supply of Goods
HSN-8523 80 20
18%
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