Indian Library Association
Shri Arun Jaitley,
Hon'ble Minister for Finance and Defense,
Government of India, New Delhi
Sub: Tax Laws affecting the development of E-Libraries in the Country.
is heartening to note that your party has recognized in its manifesto and given
priority to the development of e-Libraries in the country as an infrastructure
support to education at all levels. Our
beloved Prime Minister’s offer to Bhutan to fund and set up e-Library as a
gesture of knowledge support to our neighbor is an exemplary recognition of the
importance of E-Libraries (Times of India, 16 June 2014).
But, Sir, your budget is disappointing in this respect. You have not only carried forward the applicability of TDS on purchase/licensing/subscription of e-books/e-journals/databases but have also withdrawn the exemption from Service Tax. These two tax burdens on the e-libraries, which are not applicable to print libraries, require your kind and thoughtful attention for suitable amendments.
1. TDS or WITHHOLDING TAX
The amendment to Section 9(1)(iv) of Income Tax Act in the union budget 2012-13 appears to have brought software and electronic data under the purviewof TDS as e-content is perceived to be same as software by the tax authorities. Applicability of TDS on payment for the purchase/license/subscriptions of e-books/e-journals continues to be unclear
a). The amendment has blurred the difference between "Copyright" and "Copyrighted material" allowing wide scope for the applicability of TDS on purchase of all types of books and journals, possibly both in electronic and print media.
b). By tax department's interpretation payment for subscriptions/purchases/ licenses of e-Books/e-Journals by Libraries are treated as equivalent to software and hence come under TDS provision, which is 10% on local payment and 15-25% on payment to international publishers/vendors depending on the rate determined by the Double Taxation Avoidance Agreement (DTAA) between India and the respective countries.
c). Indian Libraries in higher education and research segments purchase/subscribe/license e-books/e-journals
predominantly from foreign publishers.
d). Foreign publishers are resisting the deduction of TDS. They claim that deduction should not be applicable to them as the corresponding treaty law (DTAA) between India and their Country is not amended to this effect.
e). Several academic publishers are non-profit organizations and are exempt from Income Tax in their respective countries. Some of them are finding it difficult to claim the tax refund form their country authorities for local reasons.
f). Thousands of small and medium publishers who deal with Indian libraries find the procedure for registration in India to get PANS and to qualify for credit from their respective country’s tax department too complex to do business with India. They prefer either to forego the business or increase the price by 25 to 30% if our libraries apply TDS on payment to them.
g). Using Indian agents for subscribing/licensing/purchasing
e-books/e-journals makes the deduction process even more complex as there are
two different set of laws governing TDS for local and imported services.
h). While a few libraries have already been issued notices by
tax Department on non-deduction of tax at source, most libraries are unclear
about its applicability itself as books and journals in print and on CD-ROM
have been spared from all kinds of taxes and duties.
It is also important for lawmakers to appreciate that E-Content in the form of e-Books;e-Journals, databases and such other learning material are different from software.
In the interest of the development of e-Libraries in the country we request you to exempt books and journals, irrespective of their access/delivery media from TDS deduction.
bring clarity about the distinction between content and the medium/technology
used for its delivery and usage, we request you to kindly issue a notification
stating that books, journals and such other educational material are different
from the software and the medium in which they are delivered.
2. SERVICE TAX
information and database access or retrieval services are the basic infrastructural and resource requirements for
E-Libraries. The services under this
category, provided by both domestic and foreign service providers, come under
the purview of service tax as defined in Section
2(L) of the Place of provision of Services Rules, 2012 (28/2012 - Service Tax
dated 20.06.2012). E-books/E-journals/databases, which are delivered online to users in the
Universities, Colleges, etc., come under this category of services.
In 2012-13 budget exemption was provided to the services provided to educational institutions, which are providing the services listed in the negative list under Auxiliary Educational Services vide no. 9 of the Mega Exemption Notification. The exemption entry included an exemption item called -- “services relating to imparting anyskill, Knowledge, education or development of course content or any other enhancement activity.” Further, in response to representations received from several colleges and universities, the Central Board of Excise & Customs issued a circular No.172/7/2013 – ST dated19th September 2013 clarifying that all services provided to educational institutions are exempt from Service Tax.
current budget has withdrawn“Auxiliary educational services” from the exemption
notification thereby bringing e-books and e-journals once again under the
levyof service tax. The payment
provision for service tax is different for online services provided by Indian
publishers and those provided by foreignpublishers, which again makes the
process of tax payment very complex.
a. Domestic Online Publishers/service providers. The publisher or his service provider isliable to levy and collect the service tax and pay to the Government.
b. International Online Publishers/service providers. In case
ofimport of online information services from the service providers abroad,the
liability of declaring and paying service tax is shifted to therecipient of the
service (Library) under notification
No. 30/2012-ST dated 20.06.2012 which says
-- “it has been notified that
service tax in relation to any taxable service provided or agreed to be
provided by any person who is located in a non-taxable territory and received
by any person located in a taxable territory shall be payable under reverse
charge method to the extent of 100 percent by the person receiving the said
service.”. This means, the library receiving online information
servicesfrom a foreign publisher will have to declare and pay to the
IndianGovernment the applicable service tax even where it buys the service
through an Indian Agent.
additional burden of service tax will further shrink the already shrunken
budgets of libraries. We request you to
exempt e-books, e-journals and all such educational content from the service
tax, irrespective of the delivery media.
to knowledge in a democratic society should be free from all barriers. While
books and journals in print medium have always remained free from taxation in
our country, bringing them under the tax umbrella in the e-medium will be a
retrograde step. We once again request
your kind attention to free all e-publications of educational and research
interest from TDS and Service burden.
Dr. Ashu Shokeen,
President of Indian Librray Association, New Delhi
Professor, Department of Library and Information Science