dear ajith,
thank you for your short and splendid response to the discussion.
from your inputs, it is clear we are in an era of transition: moving away
from indirect taxes to direct taxes, with the onus on making tax collection
more efficient. perhaps the imminent introduction of VAT is supposed to ease
that and hopefully make the era of indirect taxation and its associated
problems history.
may i bring to your attention a rather interesting point:
software engineers, whether employed, or self-employed, do fall into the
domain of individual income tax payers, and likewise corporates have their
corporate tax. yet here's the interesting point: software engineers get paid
a really tiny fraction of money, relatively speaking, for the 'monetary
wealth' their work produces for their company. and from their fee or salary,
software engineers have to pay their income taxes on their salaries as well.
in successful software companies the *total* staff salaries and
cost-to-companies is really a *tiny* fraction relatively, of the total
turnover of the company. this despite the fact that a software company is not
into manufacturing of industrial goods, that software is considered a
service, and that software companies claim their peopleware is their greatest
asset.
in truth, it is the patenting and commercial licensing that generates those
incredible revenues. the same issue confronts artists like writers,
musicians, and their publishers, wherein the publishers rake in much more and
pay a relatively tiny royalty fee to the original creators of the work.
> however, the remedy to this is not to re-introduce excise on all sorts of
> new things - like software. instead the effort should be toward more
> efficient direct tax collection - from income earners - whether they are
> software engineers or farmers. this doesn't mean increase the rates - just
> widen the tax net. [snip]
in that light, and acknowledging we are moving towards VAT, wouldn't it be
reasonable to say that all software sold for a price should attract a service
tax, or when VAT rolls in, then according to the new lingua, a 'value added
tax'? this service tax, say at 7% or whatever, is applicable whether the
software is sold as an OEM bundled software, as a commercial off the shelf
software, as a custom-built software, or any other method where money is
charged for the software per se. in addition, value added services, which are
also charged, such as maintenance, development, bug-fixing, training,
consulting, on software, would anyway attract a service tax.
to further clarify: consider the following scenarios:
1) PCs sold with OEM-bundles of FreedomBasedSoftware for a price, attract a
service tax on the price of the FBS.
2) PCs sold with OEM-bundles of non-FreedomBasedSoftware for a price, attract
a service tax on the non-FBS.
Important points for 1) and 2) If a user *cannot* purchase a PC *without* the
OEM bundle, then over-and-above the service tax, an excise tax on the whole
purchase price must also be charged. why? because the user is effectively
buying a whole box which is not broken into its components. the only way
today to buy such a box without the OEM bundle is to *first* pay for the
*whole* package (hardware and OEM bundle), carefully reject the EULA license
of the OEM bundle in the presence of witnesses, and then chase the software
company for a refund. the branded PC seller, retailer, manufacturer,
wholesaler, has *nothing* to do with all this. go figure. read the archives
of this mailing list.
3) Any third-party, further given a contract for handling any kind of
services, such as training, installation, maintenance, etc., on the software,
are also charged a service tax for their fee.
4) Any software sold to a customer, whether as a Commercial Off The Shelf
(COTS) package, or custom-developed, attracts this tax.
5) Okay, please recommend for this scenario: any software, imported into
india and sold for a price, attracts a customs duty, or a service tax?
6) likewise, please recommend for this scenario: imported PCs and laptops,
with OEM-bundled sofware, with conditions of unbundling identical to 1) and
2) above. should these pcs be recommended for tax on customs, a CVD, and/or
service tax on the price of the OEM software?
based on your inputs, will draft the final proposal to the finance ministry
and others, with signatures from those interested on linux-delhi,
linux-india, and elsewhere.
so do please respond.
:-)
LL
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