renting of generator set

[satbir singhwahi]

Generators are given on rent , Rs. 90000 per month. whether service tax applicable under rent of immovable property

[YAGAY and SUN]

Dear Satbir,

Renting of Generators would not fall under the category of Renting of immovable property as it would fall either under the taxable category of Supply of Tangible Goods under Service Tax or under Deemed sales i.e. Right to use under the PVAT Act. On this transaction, whether Service Tax would be payable or VAT is payable will depend on the principal of effective control.

If your company has the effective control on the GEN Set, then, service tax would be applicable. If the client/customer has the effective control, then, VAT would be applicable under Right to use (i.e. Deemed Sales).

Regards,

YAGAY and SUN

(Management, Business and Indirect Tax Consultants)

[Mahir S]

Sir,

I assume that generator given on rent shall be applicable for service tax as services are provided and also not covered under negative list. However, it shall not fall under Renting of immovable property, as explained above.

[Madhukar N Hiregange]

The pure provision of the equipment with the effective control and possession given to the customer would be liable for local VAT. The VAT ITC on the purchase of the genset would also be available.

If the same is operated by you or you have the effective control though the possession is with the customer [ in his premises] then liable for service tax. ₹ 10 Lakhs exemption exists for ST. If exceeded in other transactions then the cenvat credit of CED paid on the genset available for set off against the ST payable- 50 % in year of receipt and 50% in subsequent year of use. Depreciation of credit part not to be claimed.

AI Summary

Effective control determines whether renting a generator is taxed as a service or as a deemed sale subject to VAT.
Tax treatment of rented generator sets depends on which party has effective control: supplier control renders the supply a taxable service subject to service tax rules and CENVAT credit treatment of excise paid on the genset; customer control renders the transaction a deemed sale subject to VAT with availability of input tax credit.