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Sales tax to hit market: TCS

November 08, 2004 14:26 IST

Hit by a Supreme Court ruling on sales tax on software, India's largest software exporter Tata Consultancy Services said on Monday that any levy would have a dampening effect on the software product market of the country, which is in its nascent stage.

"There is no financial implication in terms of payment to the state government as we have paid Rs 1.04 crore (Rs 10.4 million) already for the considered period of 1991-94. But any levy on the software product will have a dampening effect on the market which is nascent at this stage", TCS executive vice-president and chief financial officer S Mahalingam told PTI.

He said the government should now provide some fiscal sops to the software product industry to offset the negative impact of the levy of sales tax on such products.

Software is an intellectual and intangible property, which is only stored or transmitted in floppies and discs, and therefore cannot be taxed like a commodity, he said.

Andhra Pradesh had declared in 1994 that software in floppy discs, CDs and CD-ROMs was subject to the state Sales Tax Act as they were physical goods. The state high court ruled that all branded software was subject to the state tax.

The Supreme Court last week passed a ruling upholding the AP high court judgement saying tax can be levied on software programmes that are sold off the shelf. With the ruling, state governments can now levy sales tax on popular programmes like Oracle, Lotus, Unigraphics and many others whose sales run into millions of rupees every year.


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