applicability if VAT

[Guest]

sir,

we(Municipal Corporation) are hiring tractors including vehicle,fule,dricer batta and othe maintainances for lifting of garbage and to transport to a nearby dumpyard.we are paying them Rs 680-00 per trip at four trips per tractor per day which comes to nearly Rs 85000.00. My query is whether this hiring of tractors attracts TDS under VAT and if so what is the percentage of recovery under which rule to recovert the TDS.

chakravarthy

[Dharmnath Avhad]

Dear shri sid

Your question is of such a nature that  it it is difficult to to answer in short space. If the services rendered by transport contracter are covered by the term " Transfer of right to use goods", then it will be taxable at Vat. Wether to deduct tax or not is a secondary issue. The first issue is wehter their services amounted to transfer of right to use goods.taxability will depend on facts and nature of contract. This issue needs detailed discussion. You may find some consultant well acquented with case law on this subject.Face to face discussion is must in such type of issues.

dharmnath avhad

[abhi parakh]

Dear Sid,

Would like to mention the following points in this regard - 

(1)TDS under any State VAT Act is deductible only where  a works contract involves transfer of property in goods.

(2)In the aforesaid case, as per my understanding the value of Rs. 680 per trip paid to the tractor owners is completely against the tractor hiring and not for the garbage.

(3)Moreover, understanding in common parlance, the garbage does not even originally belong to the tractor owners. 

(4)Since, the aforesaid does not amount to transfer of property in goods, the question of deducting tax at source under any VAT law does not arise whatsoever.

 

Best Regards,

CA Abhi Parakh

+91 92334 23525

[YAGAY andSUN]

Either service tax or VAT is payable on this transaction depending on the effective control on the tractors. Anyhow, works contract tax is not deductible.

AI Summary

Transfer of property in goods triggers TDS under state VAT; mere tractor hiring for garbage likely falls outside. Tax Deduction at Source under State VAT applies only where a transaction involves a transfer of property in goods or a transfer of right to use goods; purely service-oriented hiring without such transfer falls outside that TDS mechanism. In the municipal tractor-hiring scenario described, payments appear to compensate vehicle hiring and operational services rather than effect a transfer of property, so VAT TDS is unlikely; taxability may still depend on effective control and precise contractual terms.