Interesting debate that could have *some* implications for FLOSS. FN

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NEWS: IT software is taxable, rules SC

Deccan Herald, Bangalore. Nov 6, 2004

NEW DELHI: DHNS The Supreme Court (SC) on Friday ruled that computer software is liable to Sales Tax, a decision that may boost the dwindling revenue of states. This ruling would be applicable only to "off-the-shelf" software and not to "customised" ones.

Ninety per cent of the software sales account for the customized category.

A five-judge bench comprising Justice N Santosh Hegde, Justice S N Variava, Justice B P Singh, Justice H K Sema and Justice S B Sinha, gave this judgement on a petition by the Tata Consultancy Services (TCS).

The TCS had challenged the Andhra Pradesh High Court order allowing the state government to levy sales tax on the computer software, as it classified it as "goods" under the provisions of the Sales Tax Act.

Upholding the High Court order, the apex court said that when a person goes to buy a CD, he or she is not paying for the mere CD but also for the software contained in it.

While the TCS argued that software was nothing but knowledge and hence could not be categorised as goods, Andhra Pradesh said that the off-the-shelf software cannot be treated as "knowledge" making it liable for sales tax.

ST WILL SPUR PIRACY

Meanwhile, the National Association of Software and Service Companies (Nasscom) has said the Supreme Court judgement making computer software liable to sales tax, will encourage pirated software and affect the speed of PC penetration in the country, reports UNI from New Delhi.

"Immediately, however it may impact the price paid by the user and this could affect the speed of penetration of PCs in the country and also give an impetus to pirated software," Nasscom president Kiran Karnik said in a statement here.