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

Transfer of right to use determines whether VAT applies or service tax governs machinery rental transactions.
Applicability of VAT/CST versus service tax depends on whether the arrangement transfers the right to use and possession/effective control of the machinery. Transfer of right to use is treated as a deemed sale under the TNVAT framework, attracting VAT/CST; supplying machinery for use without transferring possession and effective control is a taxable service and attracts service tax. The contractual terms allocating possession, control and maintenance are decisive.