Clarification - Vat or Service tax

[Guest]

We have an anuual maintenance contract @.40/copy with a service provider for xerox. We are proving everything .i.e. paper,manpower,electricity etc. The service provider only provide free tonar etc. without charging a single amount for the same. Now service provider charging service tax @12.36% which according to me correct but also imposing VAT @7.45% on same billing amount which I think not correct since both these two tax can not be applied on same amount since VAt is related with transfer of property of goods and service tax against service provided like here AMC nature though billing is monthly.According to provider, VAT is correct because they are providing Tonar etc. at free of cost. My question such tonar as free of cost and not included in said .40/copy as per agreement that is why they cannot charge VAT as there is no transaction value(since it is free.i.e NIL). SO service tax must be charged and not VAT.

[Surender Gupta]

I am of the same view as of yours. Only Service tax is payable. VAT is payable when there is transfer of proprty. He does not give you any property, but replace the defective part. The old toner is being taken by him. Moreover, the repalcement of toner is in the course of providing a service and is a consumable item.

[Guest]

I am of the view that change of parts is a 'sale' and when it is done without charging any additional amount, then AMC component itself would be treated as 'transaction value'. Thus, VAT is also leviable on the transaction as 'works contract'. Of course, the AMC agreement required to be seen whether any different stand can be adopted based on facts of the case.

AI Summary

VAT applicability on goods supplied during an AMC versus service tax: whether toner replacement triggers VAT on AMC consideration. Issue: whether VAT applies to free-supplied toner replaced under an AMC billed per copy while service tax is charged. One position: toner replacement is a consumable act incidental to service-no transfer of property-so only service tax applies. Opposing position: replacement of parts can amount to sale or works contract; where no separate charge exists, the AMC consideration may constitute the transaction value for VAT, making VAT leviable. Determination turns on the AMC terms and whether transfer of property occurs.