Service Tax and VAT

[Guest]

Dear Sir,

We are in Machinery hire charges business. We gives our trucks on monthly hire basis. We have heard that Both Service Tax and VAT would be charged on this amount. Please confirm and if yes then whether VAT and ST will be charged on on 100% of amont

[Ganeshan Kalyani]

In my view this is deemed sale and therefore Vat is applicable. Thanks.

[KASTURI SETHI]

Sir,

It depends upon the terms and conditions of the agreement.Especially, emphasis is to be laid on the terms, "Possession and Effective Control" used in the erstwhile definition of "Right To Use Of Tangible Goods". Who has possession and effective control ? It would be determined on the basis of nature of the agreement. I also agree with Sh.Ganeshan Kalyani, Sir. It is deemed sale in terms of VAT Rules and regarding the applicability of ST it is necessary to go through the terms conditions of the agreement.

[Ganeshan Kalyani]

Yes I fully agree with Sri Kasturi Sir. Crucial points he has highlighted in his reply. Thanks. Further if Vat is paid then no service tax and if service tax is paid then Vat is not applicable. Thanks.

[DR.MARIAPPAN GOVINDARAJAN]

As rightly said by Shri Kasthuri Sethi Sir it amounts to service tax liability.

AI Summary

Deemed sale: VAT can apply to monthly machinery hire; service tax depends on possession and effective control. Monthly truck hire may be treated as a deemed sale attracting VAT where the hirer obtains possession and effective control; if the supplier retains control, service tax may apply. The contract's terms on right to use, possession and effective control determine whether VAT or service tax is chargeable, and payment of one tax will generally preclude the other on the same transaction.