Rentals on Movable Property Paid to Un-Registered Dealers

[Gurmeet Singh Rohra]

Hi Team,

We are paying rentals to our vendors towards usage of movable property. These vendors are not registered with sales tax authority as their current turnover is less than 10 lakhs & they are claiming that they should be registered with sales tax department because of turnover limit.

Query:

1. Whether their say of not getting themselves registered with Sales tax is correct.

2. If yes, please provide relevant notification / case law. So in that case whether we being registered dealers & dealing with un-registered dealers like above as we will be liable for MVAT at any penalised rate. We are sub-letting these movable assets & charging VAT on such transactions.

Please advise.

Regards,

[Ganeshan Kalyani]

Please analyse the nature of transaction involved in your case. to my understanding it seems that you are availing service of renting of immovable property. in this case service tax law will be applicable and not value added tax.

[DR.MARIAPPAN GOVINDARAJAN]

Dear Ganeshan,

In this case only movable properties are got rented and not immovable properties.

[Ganeshan Kalyani]

Thanks Mariappan Sir. Ihe renting of movable property is termed as deemed sale and liable to VAT. Further it is clear in law that prima facie the responsibility to collect tax and pay to the Government. therefore you need not have to worry. This is my view

[Ganeshan Kalyani]

Please read *lies with the supplier* with sentence '...pay to the Government'. Sorry inadvertent mistake on my part in typing.

AI Summary

Renting of movable property treated as deemed sale, liable to VAT; supplier must collect and remit the tax. Rentals of movable property are treated as deemed sale liable to VAT rather than service tax; vendors claim non-registration because turnover is below the threshold. The correspondence states that the obligation to collect and pay MVAT prima facie 'lies with the supplier', leaving the need to verify formal notifications or rulings on registration and compliance.