Computer Software Supplied To Public Funded Research Institutions Attracts 5% GST: Karnataka AAR

The Applicant, Keysight Technologies India Pvt. Ltd., is in the business of supplying scientific and technical equipment and time-based and perpetual software licences to public-funded research institutions registered with the Government of India.

The applicant submitted that it is engaged in supplying scientific and technical equipment and time-based and perpetual software licences to public-funded research institutions recognised by the government of India. In some cases, they supply equipment along with software, and in some other cases, they supply standalone software. In cases where the equipment is supplied along with software, a single invoice with distinct line items, covering goods and software, is raised; in cases where the software is supplied separately, a standalone invoice is raised separately.

The applicant has sought an advance ruling on the issue of whether software licences supplied by the applicant qualify to be treated as computer software resulting in the supply of goods and are therefore to be classified under Chapter Heading 8523 80 20.

Yet another issue raised was whether the benefits of Notifications No. 45/2017-Central Tax (Rate), Notification (45/2017) No. FD48 CSL 2017, Bengaluru and Notification No. 47/2017-IGST (Rate) all dated 14.11.2017 are applicable to the software licences supplied by the Applicant to the institutions.

The applicant submitted that Notification No.45/2017-Central Tax (Rate) dated November 14, 2017 stipulates a concessional rate of 5% GST on goods listed under column 3 of the Notification, which includes "Computer Software." The term "computer software" has not been defined under the CGST Act 2017, whereas the term "goods" has been defined under Section 2 (52) of the CGST Act 2017 to mean "every kind of movable property other than money and securities but including actionable claims, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply".

The applicant contended that they are eligible for a concessional GST rate of 5% on "computer software" in terms of Notification No.45/2017-Central Tax (Rate) dated 14.11.2017, on the grounds that their customers are mainly government departments, public-funded research institutions, and public sector undertakings. The institutions to whom they have supplied have issued certificates to that effect from an officer not below the rank of the Deputy Secretary to the Government of India, the Deputy Secretary to the State Government or the Deputy Secretary in the Union Territory, certifying that the goods supplied by the applicant are purchased for research purposes only.

The AAR observed that the Notification No.45/2017-Central Tax (Rate) dated 14.11.2017 and Notification No.45/2017-Central Tax (Rate) dated 14.11.2017 stipulate the rate of CGST/IGST at the rate of 5%, if the goods of computer software are supplied to public-funded research institutions subject to fulfilment of the conditions. The applicant is supplying computer software to a public-funded research institution under the administrative control of DRDO, Government of India.

The AAR held that the software supplied by the applicant qualifies to be treated as computer software, resulting in the supply of goods, and can therefore be classified under Chapter Heading 8523 80 20.

Applicant's Name: Keysight Technologies India Pvt. Ltd.

Citation: Advance Ruling No. KAR ADRG 11/2022

Dated: 21/04/2022

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