VAT charge on gross amount instead of basis amount

[Jignesh Shah]

We are service proivder of Maintenance & Repair service to corporates. We have one issue regarding double taxation: As per I know VAT Rules says VAT always to be charged on total amount instead of basis amount. But our client need clarification for that. Thay argued i.e. vat charge only material cost not on total means material + service tax amount. Please share and guide for the same.

[Rama Krishana]

Under VAT there are two types of transactions are covered i.e. first one is pure trading in which sale and purchase are involved and second one is a transaction in which works contract is involved in which goods are delivered by executing work as against pure trading transaction. Therefore, in the case of a transaction of maintenance and repair two activities are involved i.e. use of spares or parts and works (activity of repair). In case you are charging the customers for both the activities separately, you can charge VAT and service tax separately on each items as mutually exclusive method but if you are billing as combined than there is an issue of taxation under both the statutes as you have to pay WCT under VAT and service tax under ST according to the nature of transaction involved.

AI Summary

VAT on gross amount: VAT and service tax may both apply to combined repair and maintenance charges. Maintenance and repair combines supply of spares and repair work; if charges are billed separately VAT applies to the goods component and service tax to the services, but combined billing may attract both VAT (as a works-contract or on goods) and service tax depending on transaction characterization.