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

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.