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COMPUTER users in India will soon be able to buy Microsoft’s new operating system Windows 7, as the government has removed anomalies in taxation of packaged software sold through physical media such as compact disks.

The Windows 7 consignment to India was held up at Customs because of a tax dispute leading to possible double taxation.

The Central Board of Excise and Customs, that administers indirect taxes in the country, has instructed Customs officials to take note of the measures taken in the Budget 2009 and not tax the same software twice, once as goods and again as service, a finance ministry official said.

This directive from CBEC clears the ambiguity regarding treatment of imported packaged software, available on a physical storage media such as CDs and DVDs, the market for which is pegged at Rs 10,000 crore. The move will favourably impact companies like Microsoft, Adobe, SAP, Oracle, Autodesk, gaming software developers and others.

Reacting to the development, Microsoft India chairman Ravi Venkatesan said: “We are delighted. Shipments will clear the customs now.’’  

According to industry association, the Infotech Software Dealers Association (ISODA), the tax anomaly had caused the market for new software to fall by nearly 40% over the last 12-18 months as packaged software was stuck at customs and many individual buyers have moved to pirated versions.

"In the last three months, most of the software consignments sold in a box (comprising about 20% of the Rs 10,000-crore market) have not moved out of Customs at Chennai and Mumbai. In this duration, due to the tax ambiguity, business was down by almost 70%,” said ISODA president Devesh Agarwal.

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