Get ready to shell more for Game and software downloads from foreign publishers in India. According to a new clause in the 2010 Budget, users will have to shell out 10.3% service tax when they download, games, music or software from a foreign supplier.
The 10.3% service tax will be applicable for downloads on both your personal computer and mobile, even if you download the game or software for personal use. Earlier, downloads were taxable only if you downloaded content to further resell it to someone else.
Mr N.R. Badrinath, a partner with a consulting firm Accretive Business Consulting, told Business Line that in case of downloads made available by foreign suppliers, under the reverse charge principle’ the person downloading such software in India would need to pay the service tax at 10.3 per cent.
This means that even an individual downloading software for personal use would need to pay the service tax, seek registration under the service tax provisions and also file the statutory returns thereafter.
Non-compliance with the provisions could trigger interest and penalty. This amendment brought in with respect to information technology software services will create a lot of hardships,Mr Badrinath said.
This is definitely bad news for people who used online means to download software which are not available off-the-shelf in India, and will further piracy problems which publishers have been facing in India.
However, a relief comes from the fact that software created by foreign publishers available off-the-shelf in retail stores will not come under the purview of the new taxes and will continue to attract only custom duty of 8.24%.
Another problem right now as I can see is that, there is no clear instructions on who this service tax will be applied and whether foreign publishers will have to add it to the cost of the product itself. I will try and update on the situation once I get more information about it, but one thing is for sure that this is definitely going to increase piracy in India and cause more headaches to software publishers. On the other hand, this could also mean that more and more publishers would want to start selling their software or games through retail stores, rather than having to burden users with additional charges.
Image Credit: mytaxform.info