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Software taxation: In pursuit of a consensus

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DQW Bureau
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In a follow up to the

story ' href="https://www.dqweek.com/isoda-claims-round-one">ISODA

claims round one', dated December 27, 2010 - January 2,

2011, DQ Week tried to delve deep into the issue and seek

further clarifications from the premier association along with some

of the leading distributors and principals. Now that two weeks have

passed since the story was carried, ISODA informed that the

distributors have not yet come to a particular stand on the whole

issue. The distributors are still contemplating on whether they

should go for customs duty (CVD) or go back to service tax route. The

association had earlier claimed that the government notification has

put the ball in the court of the distributors and vendors.

Commenting on the feedback

received by the association from the distributors, Harinder Salwan,

Secretary General, ISODA, said, “Currently, distributors are facing

the problem of defining the MRP of the software product, as this is

possible only in retail boxes. For paper licenses, they have not been

able to define for the simple reason that the price changes depending

upon the quantity.” ISODA has not received any

clarity even from the principals. Salwan said, “We are already in

talks with principals like Microsoft and Adobe; and they are still

conducting internal meetings to come to a conclusion. By this

weekend, they might come to a decision on what stand they are going

to take. So far, we have not seen any difference in the approach from

either the distributors or the principals. According to them, it is a

status quo.”

Meanwhile, distributors

are toeing on similar lines with what DQ Week carried in the

issue last time. They still believe that there are some gray areas

that need to be addressed and unless they get some clarity, they can

not come to a consensus.

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Krishna K Choudhary,

Founder and Director of href="https://www.dqweek.com/rashi-appoints-universal-for-altec-lansing">Rashi

Peripherals, pointed out that like what

he had mentioned last time, the notification is hardly going to make

any difference in taxation as far as customs duty or service tax is

concerned. This will not bring any change in the pricing of the

product in the market. Cost of the products remain the same. “While it

is a known

fact that there will be either customs duty or service tax, it is

hardly going to make any difference, as the rate of customs duty

(CVD) and service tax is same ie 10.3 percent. The only difference

here is that the customs duty on products that are sold off the

shelf, are levied on MRP and that might be a little costly. There

would be marginal difference when the product would be charged to

duty at MRP base. Rest products are being sold or imported by either

paying customs duty or service tax. In fact, we have been doing

business 'pre' as well as 'post' notification and we have not changed

our price policy,” added Choudhary.

Another national

distributor, on the condition of anonymity, commented that there are

still some confusions prevailing over the notification that has come

from the Ministry of Finance. The gray areas exists even now. Till

now, only one part of the issue has got addressed in this

notification. We are making all the efforts at the government level

with the help of Microsoft, and we are just waiting for the day when

the government comes out with all the clarifications. It is up to the

government to give us a clear picture on this whole issue.

For the principal's

perspective, Microsoft again couldn't be contacted at the time of

going to press.

However, ISODA still

maintains that it has won the battle, as the association believes

that it is a workable proposition for everyone. The association also

alleges that the distributors were not a part of the negotiations

with the government. In fact, it is inviting the distributors to come

out in open in terms of giving clarity and discussing the same on the

negotiation table. “We sell the products;

distributors are the just entry and exit points for these products in

the country. They have no say in defining the processes and since

they are doing so, it is creating a whole lot of confusion. They were

not willing to share their talks and if they do not do so, they have

to accept what the industry says. Since, they don't want to be part

of the negotiation with the government, they can't define the

processes in the industry,” opined Salwan.

Meanwhile, at its upcoming

Tech Summit event in Bangkok, ISODA is going to take a call and by

that time, it expects the distributors and principals to come out

with a clarity. The association is hopeful to be back from the Summit

with some resolution in place.

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