Summary: Navigating through the taxation system is quite complex, especially in the case of HSN code and GST rate. This article addresses these tax intricacies and mentions different HSN codes available for software services.
The HSN code for software services serves as a universal language for trade, enabling businesses to navigate the complexities of cross-border software services transactions efficiently. It enhances transparency, simplifies taxation, and ensures that the appropriate duties and tariffs are applied.
Adhering to the HSN coding system contributes to a more organized and harmonized global trade environment for software services. Let’s find out more about HSN code for software development and the applicable GST rate.
HSN Code is a standardized system for classifying goods and services into various categories. It is used for classifying services for taxation and payment.
HSN Code for software services is used to categorize software-related services. These services are categorized under Group 99831 of SAC codes pertaining to information technology services.
GST is applicable to various software services such as supplying software in various formats, supplying them online, exporting services, or creating e-invoice. Here is the detailed breakdown of GST applicability on all the software services and the ones exempted from GST below:
In-State Sales: When both the supplier and receiver are in the same state, then CGST and SGST are applied.
Interstate Sales: When the supplier and receiver are present in different locations, then IGST is applied.
HSN code for software development services covers plenty of services and each service has a different code and GST rate.
For example, discs with information technology software has 85243111 HSN code and it has a 0% GST rate. Here is the complete list of all software services along with their HSN codes and applicable GST rate.
HSN Code | Description | GST Rate |
49119910 | hardcopy (printed) of computer software | 12% |
85232990 | other for recording sounds | 18% |
85238020 | discs with information technology software | 18% |
85238090 | other | 18% |
85243111 | discs with information technology software | 0% |
85244011 | magnetic tapes with IT software | 0% |
85249112 | information technology software on disc or on cd rom | 0% |
99831 | management consulting and management services; information technology services | 18% |
998311 | consultation in management areas: finance, strategy, hr, marketing, operations, and logistics | 18% |
998312 | enterprise advisory services, inclusive of pr consultancy | 18% |
998313 | IT guidance and maintenance services | 18% |
998314 | designing and formulating it solutions | 18% |
998315 | services for IT system hosting and infrastructure setup | 18% |
998316 | management of IT systems and networking | 18% |
998319 | additional it-related services, not elsewhere classified | 18% |
Yes, Input Tax Credit is available on software services GST for businesses who use software for operational activities. However, those using this software for personal use cannot claim Input Tax Credit.
GST software can be used for paying GST on software-related services. For example, it helps you to find a taxable base for software services after considering any exemptions in accordance with GST compliance and regulations. This will ensure you are paying the correct tax amount according to the HSN code applicability.
Additionally, GST software can also track software services GST-related tasks transactions and import details directly when you file GST returns. This assists in simplifying GST return filing and reducing data discrepancies.
Conclusion
The Harmonized System of Nomenclature (HSN) code for software services plays an important role in classifying and identifying these services in international trade. It delivers a standardized system that facilitates smooth communication across borders.
Software services are categorized under specific HSN codes based on their nature and characteristics, allowing for accurate documentation and streamlined regulatory processes.
The GST rate for software products and services comes under 0% to 18%.
Software upgrades are generally considered a new software supply service and therefore, the GST depends on the prevailing rates.
While open-source software is free to use, any related services and customization will attract GST payments.
The HSN code for computer service and installation is HSN/SAC 998713.
The SAC code for software maintenance is 998314 that deals with management consulting or IT services.
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