AVEVA Software (P.) Ltd. {AUTHORITY FOR ADVANCE RULINGS, TAMIL NADU}

AVEVA Software (P.) Ltd. {AUTHORITY FOR ADVANCE RULINGS, TAMIL NADU} :

Date of Order : 20-06-2023

In the case of AVEVA Software (P.) Ltd., the Authority for Advance Rulings (AAR) in Tamil Nadu addressed several aspects related to the GST implications on the distribution and licensing of foreign-made software by an Indian subsidiary of a UK multinational company.

1. Supply of Software as Goods: AVEVA Software (P.) Ltd., as the distributor, sublicensed pre-developed and pre-designed software in India. The AAR determined that the sublicensing of software qualifies as a “supply of goods” under GST laws. This classification is crucial because under GST, different rules apply to the taxation of goods compared to services.
2. Taxable Value: The AAR ruled that the taxable value for GST purposes would be the actual transaction value charged by AVEVA Software (P.) Ltd. to the end-users for sublicensing the software. This aligns with Section 15 of the CGST Act, which specifies that the value of taxable supply includes any amount that the supplier is liable to pay in relation to the supply, including subsidies or additional payments.
3. Market Support Fees: AVEVA Software (P.) Ltd. also received “Market Support Fees” from its foreign-based Central Hub. The AAR determined that these fees constituted additional consideration for the supply of goods and services. Therefore, under GST provisions, these fees were to be included in the value of the supply made by AVEVA Software (P.) Ltd., enhancing the taxable value accordingly.
4. Operating Fees to Central Hub: AVEVA Software (P.) Ltd. paid “Operating Fees” to its foreign-based Central Hub in exchange for various distribution rights. The AAR categorized these payments as import of services under GST, with the recipient (AVEVA Software (P.) Ltd.) in India being liable to pay GST under reverse charge mechanism. The taxable value for these operating fees was determined as per Rule 28 of the CGST Rules, 2017, which specifies methods for valuing imported services for GST purposes.

In summary, the rulings by the AAR clarify that the distribution and sublicensing of foreign-made software by AVEVA Software (P.) Ltd. in India are subject to GST. The taxable value includes the actual transaction value charged to end-users for sublicensing, along with any additional consideration received such as Market Support Fees. Furthermore, payments made by AVEVA Software (P.) Ltd. to its foreign Central Hub for operating rights are treated as imports of services under GST, with specific valuation rules applied as per the CGST Rules, 2017. These rulings provide clarity on the GST treatment for such transactions, ensuring compliance with the law and proper assessment of GST liabilities.