Hi,
If you sell the Software in a CD/DVD/Pen Drive, it'll be treated as Goods and liable to VAT as per the State VAT Act. In that case, you need to register for VAT with UP Govt and obtain a Tax Identification Number(TIN). There is a threshold limit for VAT Registration. Request you to consult a CA in UP or directly check with VAT Office in Varanasi.
1) Provide a Bill showing VAT if you are liable to register for VAT. Otherwise, provide a normal Bill and say you need not register for VAT.
2) Software Sold in CD/DVD/Pen Drive is liable to VAT and the Services which you provide from 2nd Year are liable for Service Tax. You will also have to pay Income Tax on the Profits from the Business
3) Threshold limit for Service Tax Registration is Rs. 9 Lakhs and to collect Service Tax from Customers is Rs. 10 Lakhs
Trust this clarifies your doubts. Feel free to revert for any clarifications.