Service tax on rental agreements of machines

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

22 May 2014 Dear Experts,

Ours is an importer of Medical machines which we provide to various hospitals on rental basis under lease deeds for 5 yrs. We raises service tax invoices and we provide the medical consumables free of cost for running the machines.
Recently our supply co based in USA has appointed a distributor in India from whom we have to buy the consumables now.
My query is:
Now the local distributor is charging local vat of 12.5 % beside custom duty of 16.85 %.In that case we are not able to get the input credit of VAT and Service tax thereby causing more losses.
We want to object the same to our supplier in USA. Please provide me the points to be raised for the same strongly.
Early reply is really helpful since we are in discussion for the same.
Thanking you in advance

mtvcamba

mtvcamba (Expert)
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23 May 2014 It would be better if you take an opinion from your CA rather than taking the advise from the experts.

However you can make the workings showing the total out flow to you before this change and current outflow.

MJ Krishnamurthy

MJ Krishnamurthy (Expert)
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24 May 2014 While importing the consumables there was no levy of VAT,but customs duty was paid.Now VAT is an additional levy. If this distributor is in other state you can issue 'C' form and get the CST reduced to 2%. In both the cases of the distributor being a local or an interstate dealer you can purchase the consumables on 'sale in the course of import'basis,wherein levy of CST/VAT can be avoided.If the distributor is also supplying the medical machines on lease and charging ST on it,you can take input credit of the same,while paying ST.I think this solves most of your problem of additional tax burden.....mjk

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