computation of service tax on equipment leasing

[JAGANATHAN KUMARAVEL]

Please let me know whether serive tax has to be levied on the equipments leased by a manufacturing company to its associate Company.  Iin the State of Karnataka VAT is being charged on the  Lease Rental ( Depn+Int charges)

If service tax is applicable  what is the abatement available.  

 

[Guest]

If transfer of possession/control does not exist, service tax will apply under the category of 'Supply of Tangible Goods Service'. Please refer Ministry's Circular/Letter D.O.F.No 334/1/2008-TRU dated 29.2.2008. In cases of transfer of possession/control in such leasing transactions, only VAT will be applicable.

[YAGAY andSUN]

if there is no transfer of possession or effective control by the service provide then service tax would not be applicable only VAT will be applicable.

AI Summary

Supply of Tangible Goods Service: service tax may apply to equipment leasing absent transfer of possession or control. Whether service tax applies to equipment leasing depends on transfer of possession/control. If there is no transfer of possession or effective control, the lease may attract service tax as a Supply of Tangible Goods Service per Ministry guidance; where possession or effective control is transferred, VAT alone applies to lease rentals. Practitioner replies in the discussion conflict on the applicability of service tax when transfer of possession/control is absent, and no abatement guidance is provided.