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,

AI Summary

Clarification on VAT obligations for registered dealers renting from vendors below the 10 lakh turnover threshold. A discussion revolves around the issue of paying rentals for movable property to vendors who are not registered with the sales tax authority due to their turnover being below the 10 lakh threshold. The query seeks clarification on whether these vendors need to register for sales tax and if the inquirer, as a registered dealer, would face any VAT liabilities when dealing with unregistered vendors. Responses suggest that renting movable property is considered a deemed sale subject to VAT, and the responsibility to collect and remit tax lies with the supplier.