Exemption from Excise duty on transfer of right to use packaged, canned software – Condition of Commercial Exploitation Removed

By TIOL News Service

NEW DELHI, FEB 26, 2010: THE Central Government had provided exemption from levy of excise duty for packaged software or canned software falling under Chapter 85 of CETA, 1985, on that portion of value as determined under Section 4 of the Central Excise Act, 1944 which represents the consideration paid or payable for transfer of the right to use such goods through Notification 22/2009-CE dated July 7, 2009.

This exemption was subject to the condition that the transfer of right to use shall be for commercial exploitation including the right to reproduce, distribute and sell such software and the right to use the software components for the creation of and inclusion in other information technology software products. For the purpose of this exemption notification, “packaged software or canned software” was defined to mean software developed to meet the needs of variety of users, and which is intended for sale or capable of being sold off the shelf.

Further, it was stipulated that the person providing the right to use shall make a declaration to this effect to the Assistant/Deputy Commissioner of Central Excise in respect of such transfer of the right to use for commercial exploitation and also be registered under Section 69 of the Finance Act, 1994 read with Rule 4 of the Service Tax Rules, 1994.

Now by virtue of Notification 17/2010-CE dated February 27, 2010, the condition that the transfer of right to use shall be for commercial exploitation is removed. The Notification 22/2009-CE stands superseded.

Now irrespective of whether the transfer of right to use is for commercial exploitation or not, the exemption from excise duty on the portion of value representing consideration paid or payable for transfer of right to use such goods, is available.

A similar change is effected for exemption from levy of CVD by superseding Notification 80/2009-Cus dated July 7, 2009 with Notification 31/2010-Cus dated February 27, 2010.