CIR. NO.70/19/2003-CX(ST), DT. 17/12/2003

Clarification on the taxability of maintenance of Computer Software

An issue has been raised whether the organisations who are engaged in design, development are maintenance of Software and enter into Annual Maintenance contracts for maintenance of their software, are exempt from Service Tax or not.

2. "Maintenance or repair" means any service provided by (i) any person under a maintenance contract or agreement or (ii) a manufacturer or any person authorised by him in relation to maintenance or repair or servicing of any goods or equipment. In the instant case repair is not of tangible goods but that of intangible program/software which is in installed condition and thus the maintenance and repair of software is not maintenance and repair of "goods". Further an exemption has been granted to maintenance or repair services in relation to computer, computer systems and computer peripherals vide Notification No. 20/2003-ST dated 21.8.2003. As such computer software would form a part of computer systems would be covered under this notification. Under the category of "consulting engineer" vide Notification No. 4/99-ST dated 28.2.99 taxable service provided to any person by a consulting engineer in "elation to computer software is exempted. The definition of "Business Auxiliary Service" also specifically provides that; inter alia, maintaining of computer software is covered in the T service, which is excluded from the scope of business auxiliary service.

3. Taking the above into consideration, it is to clarify that maintenance of Software is not chargeable to Service Tax.

4. Suitable Trade Notice may be issued for the benefit of the trade.

5. The receipt of this Circular may kindly be acknowledged indicating the date of its receipts in your office.

6. Hindi version will follow.

Manish Mohan
Under Secretary to the Government of India

F.No. 256/9/2003-CX-4

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