Tally urges software codification to make India ‘products hotspot’

• India has the potential, talent and the will to become the next software products hotspot in the world, provided the government is ready to offer required regulatory support.
• The primary requirement is to recognise ‘software products’ as a separate category both under the HSN code (Harmonized System of Nomenclature) and the SAC code (Service Accounting Code).
• This was recently pointed out by Tejas Goenka, Managing Director, Tally Solutions, a business management software provider in an interview.

Need for a separate category for software products

• Currently, off-the-shelf software is being classified as goods and other kinds of software are classified as services, creating ambiguity about software products that are delivered virtually.
• Sales and distribution of software products under the current classifications are difficult and financially unviable.
• The categorisation of ‘software products’ as a separate category both under the HSN code and the SAC code will help provide clarity and appropriate incentivisation for the industry.

Harmonized System of Nomenclature

• The Harmonized Commodity Description and Coding System, generally referred to as the Harmonized System or simply the "HS", is a multipurpose international product nomenclature developed by the World Customs Organization (WCO).
• The HS is governed by "The International Convention on the Harmonized Commodity Description and Coding System", which was adopted in June 1983 and entered into force January 1988.
• The objective of the HS Convention is to facilitate trade and information exchange by harmonizing the description, classification and coding of goods in international trade.

• The HS is used for Customs tariffs and the collection of external trade statistics.
• It is also extensively used by governments, international organizations and the private sector for many other purposes, such as internal taxes, trade policies, monitoring of controlled goods, rules of origin, freight tariffs, transport statistics, price monitoring, quota controls, compilation of national accounts, and economic research and analysis.

Service Accounting Code (SAC)

• It is a system of nomenclature introduced by the Central Board of Indirect Taxes and Customs (CBIC).

• These codes are used to identify services and GST Rates associated with these services to compute tax liability.
• SAC (Services and Accounting Code) codes depend on the Harmonized System of Nomenclature which is a globally perceived framework for arranging and classifying all the services.
• This framework empowers the consistency of GST dependent on universal principles.
• It will give a typical structure to the government for the collection of data or analyzing the equivalent.