Services of software development & customisation taxable at place of 'recipient', clarifies CBIC

CBIC issues clarification on applicability of the Place of Provision of Services Rules (POPS Rules) to development of software and services on software; Explains,“Software being intangible, does not have a unique existence and can exist on different servers at the same point in time…Limited access to the software for a limited period through electronic protocols is given to the service provider by the recipient of service to enable the former to provide the service. Only the recipient of service has control over who accesses the software, when it can be accessed, for how long and for what purpose.”; Applying the definition of “declared services” in Section 66E(d) of the Finance Act and the provisions of POPS Rules, CBIC clarifies – (i) in case of services where data, instructions etc. are provided so as to develop software i.e. development, design and programming of IT software, the place of provision of service is the location of service recipient, while (ii) in case of services on software involving testing, debugging, modification etc. i.e. customisation, adaptation, ugradation, enhancement, implementation of IT software, the place of provision of service is the location of recipient; Therefore, in both cases, place of provision of service is the location of service recipient : CBIC Circular