Franchise Security Deposit Under Various Scenarios

[Guest]

Dear Sir/ Madam,

Assessee is a financier(franchisor) who finances businesses and extends financial services to their member agents(franchisee) to extend such services to customers all over india. The aim is to provide easy financing and earning for people in remote areas.

To start the agreement of franchising, the assessee has to make 2 deposits:

1. A fully refundable working capital deposit. (will be refunded at the time of termination/completion of agreement).

2. A fully/partially/no-refund deposit against the assest given for sale for starting the business ,ex: computer supplied against deposit (the deposit is fully/paqrtially/no-refund based on the time period of 3 years, and normal wear and tear).

Possible Outcomes/Query:

1. The client has asked us first and foremost that what is the applicability of VAT And CST In the state of maharashtra on these deopsits.

2. In case due to depreciation and partial refundable deposit in case of assets or no refundable deposit from assets, how should the income be recognised ?

3. How should the income be recognised, meaning to say, if i give an asset out for 20,000 and after 3 years receive the same fully depreciated asset back , i have to refund nil to the agent, how must the income be recognised and hen should i recognise it(at the time of depreciation during the various years or on expiry of 3 years )?

Thank you

Regards,

clutch.

AI Summary

Financier Seeks Guidance on VAT and CST Applicability for Franchisee Deposits and Income Recognition of Depreciated Assets A financier acting as a franchisor provides financial services to franchisees across India, requiring two types of deposits: a refundable working capital deposit and a deposit for assets, which may be fully, partially, or non-refundable based on usage and depreciation over three years. The financier seeks advice on the applicability of VAT and CST in Maharashtra for these deposits and guidance on income recognition when assets are returned depreciated. Respondents requested clarification and a more detailed query to provide accurate advice.