No VAT on Software Implementation

Companies are not liable to pay any Value Added Tax (VAT) for the software “implementation” process, which happens after installation of customised software. The contention of the State that the process of implementation of IT software is a pre-sale activity and, therefore, constitutes sale is without substance and contrary to the law, the Court held in its recent verdict. In the process, there is no transfer of any goods or right to use any goods, what is rendered is service and therefore, said consideration paid as service charge is not subjected to VAT but subjected to service tax,” the High Court ruled.