Service tax and VAT at same Invoice

[Naveen Sharma]

Dear all,

i have received a bill of car rent from Telangana, they have charged service tax along with VAT.

is this invoice is correct, as service tax and vat cant be charged in same invoice.

please help me with this issue.

Thanks

[YAGAY andSUN]

By applying the principal of effective control and possession only on Tax can be levied.

[Naveen Sharma]

Dear sir,

thanx for your reply, please simply state that can they charged service tax and VAT at same bill of renting a cab?

[YAGAY andSUN]

If the service provides possess the effective control then Services are being provided to you and Service Tax would be applicable.

If the effective control is in your possession i.e. you drive the cab, insurance expenses, Repair etc is undertaken by you then the cab owner will charge rent from you along with VAT.

Check the facts to determine the jurisprudence of applicable Tax

[Naveen Sharma]

Dear sir,

Service provider is the owner of car and he is also providing driver, i am just taking service of cab from one pplace to another, now service tax is applicable and valid, but is VAT also will be charged in the same invoice.

[YAGAY andSUN]

Do not pay him VAT.

[Ganeshan Kalyani]

Either VAT or Service tax can be levied but not both.

[KASTURI SETHI]

Sh.Naveen Sharma Ji,

In your case/situation both ST and VAT are applicable as sale(Deemed Sale) and service both are involved. Look into the following extracts deeply:-

M.F. (D.R.) Letter D.O.F. No. 334/1/2008-TRU, dated 29-2-2008 (Extracts)

4.4  Supply of tangible goods for use :

4.4.1 Transfer of the right to use any goods is leviable to sales tax / VAT as deemed sale of goods [Article 366(29A)(d) of the Constitution of India]. Transfer of right to use involves transfer of both possession and control of the goods to the user of the goods.

4.4.2 Excavators, wheel loaders, dump trucks, crawler carriers, compaction equipment, cranes, etc., offshore construction vessels & barges, geo-technical vessels, tug and barge flotillas, rigs and high value machineries are supplied for use, with no legal right of possession and effective control. Transaction of allowing another person to use the goods, without giving legal right of possession and effective control, not being treated as sale of goods, is treated as service.

4.4.3 Proposal is to levy service tax on such services provided in relation to supply of tangible goods, including machinery, equipment and appliances, for use, with no legal right of possession or effective control. Supply of tangible goods for use and leviable to VAT/sales tax as deemed sale of goods, is not covered under the scope of the proposed service. Whether a transaction involves transfer of possession and control is a question of facts and is to be decided based on the terms of the contract and other material facts. This could be ascertainable from the fact whether or not VAT is payable or paid.

"It was further held that the taxable event in case of ‘Supply of Tangible Goods Services’, is the supply of goods and not their use." Affirmed by Hon'ble Supreme Court [Commissioner v. Petronet LNG Ltd. - 2017 (47) S.T.R. J40 (S.C.) = 2016 (5) TMI 1323 - SUPREME COURT]

CESTAT's ORDER reported as 2016 (46) S.T.R. 513 (Tri. - Del.) = 2013 (11) TMI 1011 - CESTAT NEW DELHI in the PETRONET LNG LTD.

Finance Act, 1994 - Section 65(105)(zzzzj) ibid - Scope of - Exclusion of transfer of possession and effective control of tangible goods - It is consistent with constitutional limitation on legislative field of Parliament - After introduction of Article 366(29A)(d) of Constitution of India such transfer of right to use goods is ‘deemed sale’ liable to Sales Tax, which is within purview of State legislature. [paras 13, 24]

[YAGAY andSUN]

2016 (1) TMI 1066 - AUTHORITY FOR ADVANCE RULINGS M/s SICPA India Pvt. Ltd. New Delhi Versus Commissioner of Service Tax, Commissioner of Trade And Taxes, Govt. of NCT of Delhi

[YAGAY andSUN]

CBEC Circular No. 198/08/2016-SERVICE TAX, Dated: August 17, 2016

[KASTURI SETHI]

M/s.YAGAY AND SUN,

Dear Sirs, Board's circular and judgment quoted by you are very very useful. Difference of opinion always leads to healthy discussion and healthy discussion leads to excellent results. And thus querist gets best service.

Really indebted to you for sharing your knowledge on this forum.

[KASTURI SETHI]

Now ball is in the court of querist. He is to decide how to proceed ahead. I make the position easier for the querist.

If

(i) Driver is of owner of car;

(ii) Insurance of car is by owner

(iii) ESI, PF deducted of driver is deducted by owner of car

(iv) Repair, maintenance etc. is got done by owner

(v) Petrol borne by owner of car.

It means possession and effective control is with the owner of a car and service stands provided. Taxable event is 'supply'.

VAT has been charged because deemed sale is involved as explained above.

In the absence of contract or agreement, Invoice is contract as per Evidence Act.

So both ST and VAT both are correctly charged.

[Naveen Sharma]

Dear Kasturi sir,

thanks for your valuable information and also thanks to Yagay and Sun for their knowledge.

AI Summary

Possession and effective control determines whether car hire is taxed as service or as deemed sale, affecting tax applicability. Applicability of service tax or VAT on car hire depends on whether the owner retains possession and effective control. If the owner provides driver and bears insurance, maintenance and related obligations, the transaction is a service liable to service tax. If both possession and effective control pass to the user, the right to use is a deemed sale liable to VAT. Characterisation is a question of fact determined from the contract and surrounding circumstances.