Service Tax Circular no 198/08/2016

[Asked by Guest]

Dear Sir

Request you to please explain in short regarding Circular no 198/08/2016 – Service Tax liability in case of hiring of goods without transfer of right to use goods.

[PAWAN KUMAR]

Dear Sir,

The subject circular issued for clarifying the nature of transaction involving hiring of goods without transfer of right to use such goods. The transactions involving hiring of goods with transfer of rights to use such goods would be subject to state taxes i.e. VAT as a sale. However hiring of goods without transfer of rights to use such goods is declared service. Keeping in view of the problem in assessing transactions whether sale or service, cbec has clarified the conditions based on supreme court judgment of BSNL. These conditions, terms & conditions of the contract may be reviewed in each case while determining the taxability so as to avoid unnecessary course of litigation with the department.

[Ganeshan Kalyani]

Sir, nicely explained. Thanks.

[KASTURI SETHI]

I endorse the views of Sh.Pawan Kumar and Sh.Ganeshan Kalyani, experts.

AI Summary

Hiring of goods without transfer of right to use treated as service, whereas hiring with transfer treated as a sale.
Hiring of goods without transfer of the right to use is classified as a service, whereas hiring involving transfer of the right to use is treated as a sale subject to state VAT; CBEC provided clarifying conditions based on judicial guidance and transactions must be assessed by reviewing contract terms and conditions to determine taxability.