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Regarding computer software- Scope of exemption under S. No. 173 of
notification No. 11/ 97-Cus., dated 1. 3. 97
Circular
No. 7dated
10th February 1998
I am directed to state that references have been
received from the assessee and the field formations regarding the scope of
'Computer software' for the purposes of exemption under S. No. 173 of
notification No. 11/97-Cus. dated 1. 3. 97. References have also been received
from the field formations whether the benefit of exemption is applicable to
software used in telecom equipment or medical equipment.
2. The matter has
been carefully examined. The notification uses the expression 'computer
software' for customs purposes. the word 'computer' has to be interpreted as an
automatic data processing machine falling under heading No. 84.71 of the First
Schedule to the Customs Tariff Act.
3. 'Software' means
any representation of instructions, data, sound or image including source code
and object code, recorded in a machine readable form, and capable of being
manipulated or providing interactivity to a user, by means of an automatic data
processing machine. However, it is to be appreciated the exemption under S. No.
173 of notification No. 11/97-Customs is to 'computer software' and not to
software' in general and is to be interpreted strictly on its own terms.
4. Having regard to
the discussion above, it is clarified that for the purposes of the exemption
under S. No. 173 of notification No. 11/97-Cus. dated 1. 3. 97, 'computer
software' is to be taken to mean any representation of instructions, data, sound
or image including source code and object code recorded in a machine readable
form, and capable of being manipulated or providing interactivity to a user, by
means of an automatic data processing machine falling under heading 84. 71.
Thus, the said exemption will not cover software required for operation of any
machine performing a specific function other than data processing and
incorporating or working in conjunction with an automatic data processing
machine. More specifically, software for telecom, medical or other applications
is not eligible for exemption from duty. However, software containing
encyclopaedia, games, books, etc. will be eligible for the exemption wherever
they satisfy the interactivity criterion.
5.
The pending assessments may be finalised in the light of the above
clarification.
6. Notification No.
11/ 97-Customs is being amended suitably to put the matter beyond any doubt.
Copy of the amending notification follows.
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