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During the course of VAT audit, it was pointed out by the audit that VAT has been omitted to be paid for the period from 1st August 2009 to 31st March 2014.
We have explained to audit that in the Finance Bill, 2009 an amendment was made to Section 65(53a) of Finance Act, 2003 in the definition of Information Technology software the word "acquirer" was replaced by the word "provider" with effect from 16th May 2008. After the substitution the provider of information technology software service (ITSS) was brought under service tax purview as against the acquirer of such IT software for the purpose of commercial exploitation including the right to reproduce, distribute and sell. With the introduction of service tax on ITSS, charging of VAT on ITSS has been discontinued by us from 1st August 2009. We have informed about the change in applicability of tax (i.e. from VAT to Service Tax) on software license and discontinuance of __________ https://www.mhc.tn.gov.in/judis/ W.P.Nos.1413 to 1417 of 2018 charging of VAT to Assessment Circle. Adyar II vide letter dated 25th November 2009 submitted on 27th Nov 2009. A copy of the same is enclosed.
35. Though the Court had left the issue open as to whether sale of unbranded software was liable to tax or not at the same time, nevertheless held that it was goods.
36. “Information Technology Software Services” was specifically excluded from the definition of “Business Auxiliary Services” (BAS) in Section 65(19) of the Finance Act, 1994 when the definition of “Business Auxiliary Services” (BAS) was amended in the year 2003.

40. “Information Technology Software Service” was brought within the purview of taxable service with effect from Finance Act No.2 of 2009 with the introduction of Section 65(53a) and Section 65(105)(zzzze) in the Finance Act, 1994.

41. In 2009 vide Finance (No.2) Act 2009, the definition of taxable service of “Information Technology Service” in Section 65(105)(zzzze) of the Finance Act, 1994 was tweaked and amended with effect from 16.05.2008. With effect from 16.05.2008, the definition of “Information Technology Software Service” in Section 65(53a) and the definition of taxable service in relation to“Information Technology Software” read as under:-

In view of the above referred amendment to Sec.65(105)(zzzze), we wish to seek your clarification as to whether sale of software licenses would fall under the definition of “ information technology service” especially when they are construed as sale of goods for the purpose of levy of VAT, thereby sale consideration of software license be deemed to be value of Information technology software service?