Rental on machinery as per TNVAT Act

[Rambabu Dompaka]

Dear Expert,

We are giving our machines on rental basis to local and outstation customers and we are charging service tax on it.

As per our assessing officer ,he was insisting us to charge VAT or CST on that rental income.

Please let me know, how far it is correct to collect sales tax from our customer.

Some of our customers are not agreeing with us on this matter.Please help us with relevant sec as per TNVAT and if any landmark judgments, whether to charge sales tax or not on rental income.

Regards,

Rambabu.D

AI Summary

Debate on VAT vs. Service Tax for Machinery Rentals: Transfer of Possession Key to Tax Applicability Under TNVAT Act. A query was raised about whether VAT or CST should be charged on machinery rental income under the TNVAT Act. An assessing officer suggested charging VAT/CST, but the inquirer already charges service tax. An expert clarified that VAT/CST applies only to sales transactions involving the transfer of possession and control. Since renting machinery without transferring possession is a service, service tax applies. Another expert noted that VAT applicability depends on the contract terms, specifically who holds control and possession. If the right to use is transferred, it is deemed a sale and VAT applies; otherwise, it's a rental service subject to service tax.