Applicability of service tax - Led display

[Asked by Guest]

i wanted to ask question rearding service tax that our company imported LED Display Board from Taiwan and that board we given one of reg.company on mnthly lease rent basis installed at Bangalore and billing on mumbai address.our company is in mumbai only. we charged m.vat @12.5% on rent amt., can we charged service tax also on that lease contract.plz specify

[madhavvan n]

In my view first aspect on sales tax is that this is a lease and movement of goods from one state to another ( maharashtra to karnataka has taken place) how you have charged mvat on this it is inter state hence cst is applicable Transfer of right to use (like leasing and hire) - As per section 2(g)(iv) as amended w.e.f. 11th May 2002, ‘sale’ includes a transfer of right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. this transaction is termed as ‘leasing’ or ‘hire’. The transaction is taxable only when exclusive possession of goods and right to enjoy them freely for contracted period is given Service tax What is taxable - 65(105) (zzzzj) Any service provided or to be provided to any person, by any other person in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances; based on above you will have to charge service tax @10.30% on the value of lease rentals excluding CST

[Markesh Antony]

What is the correct nature of transaction? A sale or service? As per the provisions of service tax leading of tangible propery, once it is held that it is sale and liable to sales tax, no service tax can be imposed. Yes, I agree to the extent that you should determine that it is a local sale of interstate sale. But once it is held as sales or deemed sales, no servcie tax is payable. On the contrary, if it is not held as sales, you need to pay service tax.

[madhavvan n]

as per the facts it is a lease where there is no transfer of property but there is transfer of right to use goods hence accordingly as per sales tax law it will be liable for lease tax and as far as service tax is concerned it is covered under right to use tangible property henec service tax is indeed applicable had it been a sale then only it would have been liable for sales tax only as service tax is not applicable where there is sale of goods

AI Summary

Transfer of right to use: lease characterisation decides whether sales tax applies or service tax on supply for use.
Characterisation of the leased LED display as a transfer of the right to use with exclusive possession determines sales tax treatment as a deemed sale; absent such transfer of possession and effective control, the arrangement is taxable under the supply of tangible goods for use service entry and service tax applies to lease rentals, with the taxable base excluding inter state sales tax.