Applicability of vat on hiring of photocopier

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p k venkatasubramanian (Querist)
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11 June 2013 we are a central government organisation proposing to enter into an hiring contract for photocopiers. The firm had quoted VAT extra but not service tax. please confirm whether VAT is applicable on this contract?

p k venkatasubramanian

p k venkatasubramanian (Querist)
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11 June 2013 further to my query, please confirm the applicability of VAT on hiring of photocopier for a period of 2 years instead of one year?

Ganeshbabu K

Ganeshbabu K (Expert)
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11 June 2013 Rent on machinery can be seen as " Transfer of right to use" and VAT is applicable on respective state acts,

"Right to use" is treated as deemed sale and VAT is applicable.

In situation where "transfer of right to use" is not treated as deemed sale Service tax is applicable and not VAT.

Note: if machine was provided along with operator it is not treated as "transfer of right to use"

Thanks & regards
Ganesh babu k

p k venkatasubramanian

p k venkatasubramanian (Querist)
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12 June 2013 thanks for the response. please kindly reply as there is a variation in the previous query. Our organisation will be paying a fixed charge of say 50 paise per copy taken without any rental or hiring charges for hiring of the photocopier. In such a situation please clarify, whethere the said contract is construed to be a deemed sale which attracts VAT? or will it be considered as a works contract which attracts Service Tax? We are not going to engage any service personnel from the company which offers the Photocopier to operate the machine.

Ganeshbabu K

Ganeshbabu K (Expert)
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12 June 2013 ****Service tax---No
Explanation:-

1)Indeed printing (both on textile and paper) has been held as ‘works contract’ for the purpose of sales tax.service tax will not apply for the following reason,

(i)Though reverse charge applies in case of works contract, reverse charge mechanism is only a mode of collection of service tax. That provision is not a levy of service tax. Thus, if an activity is not leviable to service tax, no service tax would be payable simply because that activity is covered under definition of works contract.

(ii)Carrying out an intermediate production process as job work in relation to agriculture, printing or textile processing is exempt – Sr No. 30(a) of Notification No. 25/2012-ST dated 20-6-2012 effective from 1-7-2012.

Thus, if printing is done on job work basis, it is out of purview of service tax.

Thanks & regards
Ganesh babu k

Ganeshbabu K

Ganeshbabu K (Expert)
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12 June 2013 VAT:-

you have not provided details like who is supplying paper..,ink and other consumables.

Yes.It is not a normal sale as defined under sale of goods Act but a deemed sale of goods subject to sales tax by the States.

In the `deemed sales’ the states can levy Sales tax only on `the transfer of property in goods” . In other words , the states can levy Sales Tax / VAT only on the `Material Value’ of the works contract and not on the `labour portion’ of the works contract.

1)If you have supplied paper to printer he can charge VAT on ink,and other consumables if any..

2)if paper also supplied by printer..VAT is applicable on paper,ink,...

Thanks & regards
Ganesh babu k

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p k venkatasubramanian

p k venkatasubramanian (Querist)
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13 June 2013 thanks for the narrative explanation and enlightenment of the subject.
p.k.venkatasubramanian
integral coach factory, chennai-38
phone 9003141104

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