Activity in relation to delivery of goods on instalments

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.... to delivery of such goods, it will be covered here. For example a hire purchase agreement contains some separate charges for documentation, front end charges, administrative charges, terminal charges etc. All these charges will be covered in this entry. However in terms of Notification No. 26/2012 - ST, dated 20-06-2012, services in relation to financial leasing including hire purchase are taxed on a value equal to 10% of such transactions. Also by explanation to this notification, it was clarified that amount charged represents interest i.e. difference between the instalments paid towards repayment of the lease amount and the principal amount contained in such instalments. Further it was clarified that such abatement is available only f....

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....ry is 'voluntary dispossession in favour of another' and that 'in all cases the essence of delivery is that the deliverer, by some apt and manifest act, puts the deliveree in the same position of control over thing, either directly or through a custodian, which he held himself immediately before the act'. The nature of such arrangements has been explained by the Supreme Court in the case of Association of Leasing & Financial Service Companies Vs Union Of India [2010 (10) TMI 4 - SUPREME COURT OF INDIA]. The relevant extract in para 20 of the said judgment is reproduced below: "20. According to Sale of Goods Act by Mulla [6th Edition] a common method of selling goods is by means of an agreement commonly known as a hire-purchase agreement w....

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....alify as 'delivery of goods on hire purchase or any system of payment of instalments'. On the other hand 'financial leases' or 'capital leases' strongly resemble security arrangements and are entered into for financing the asset. The lessee pays maintenance costs and taxes and has the option of purchasing the lease end. Such arrangements resemble a hire-purchase agreement and would fall under the said 'deemed sale' category. The essence of this deemed sale category is that the arrangement under which the goods are 'delivered' should be in the nature of a financing arrangement wherein the lessee pays maintenance costs and taxes and has the option of purchasing the asset so delivered at lease end. It may, however, be pointed out that in case....