Plant & Machinery On rent

[Ashok Chopra]

I have given my entire unit on Lease. I am charging Rs. 200000 on account of Lease Rent  of Land and Building and Charging Service Tax.  Also charging Rs. 300000 on account of Lease rent of Plant and Machinery.

My Queries:-

1. Whether VAT and Service Tax both will be charge on Lease Rent of Plant and Machinery or any one from above,  either VAT or Service Tax?

2. If both will be charge, how first Service Tax and thereafter VAT on both amount (Lease Rent+Service Tax) or first VAT and thereafter Service Tax on both amount (Lease Rent+VAT).

3. Please also provide me the copy of notification/clarification/guideline, order or judgement of the court with regard to above.

Thanks and regard

AI Summary

Effective control determines whether leasing plant and machinery attracts VAT or is treated as a taxable service under service tax.
The tax characterisation of leasing plant and machinery depends on the effective control over the assets and the lease terms: if the lessee obtains effective control the transaction is treated as supply of goods attracting VAT; if the lessor retains effective control it constitutes a taxable service attracting service tax. Whether both taxes apply depends on that factual and contractual determination.