SERVICE TAX PAID. IS VAT APPLICABLE ON IT?
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
17 May 2010
Hi! CA Friends
Our client has done 2/3 services under service tax registration, who is actual a trader, purchase and sell the items under VAT registration.
In recent activity, one day the VAT authorities are came and audit the things.
In that they search the ITRs/VAT returns/ST returns,
and concluded that for the service tax paid items/services again they are asking VAT.
Is it correct or not under AP VAT. Suggest...
Our client has done 2/3 services under service tax registration, who is actual a trader, purchase and sell the items under VAT registration.
In recent activity, one day the VAT authorities are came and audit the things.
In that they search the ITRs/VAT returns/ST returns,
and concluded that for the service tax paid items/services again they are asking VAT.
Is it correct or not under AP VAT. Suggest...
17 May 2010
Plese provide the nature of service and Business
Querist : Anonymous
Querist :
Anonymous
(Querist)
17 May 2010
Services are GTA (Transportation), Renting under Supply of Tangible Goods, Maintenance & Repiars and
the main busiess is industrial gases trading in bulk & retail supplies.
Please ask any further reference.
the main busiess is industrial gases trading in bulk & retail supplies.
Please ask any further reference.
24 July 2025
Thanks for sharing the details! Here’s a concise explanation regarding **VAT applicability on Service Tax paid items/services** under the Andhra Pradesh VAT regime (and generally):
---
### Key points:
1. **VAT and Service Tax are different taxes levied by different authorities:**
* **VAT** is on the sale of goods.
* **Service Tax** is on the provision of services.
2. **VAT is applicable on sale of goods.**
* If your client is trading in goods (like industrial gases), VAT applies on the **sale price of goods**.
3. **Service Tax is applicable on services provided (like GTA, renting, maintenance).**
* This tax is separate from VAT.
4. **No input VAT credit is allowed on service tax paid.**
* Service tax paid on services **cannot be adjusted against VAT** liability.
* They are independent taxes.
5. **Whether VAT is chargeable on items/services on which service tax is paid depends on the transaction nature:**
* If the service tax is paid on pure services (like transportation, renting), VAT should **not** apply on those services.
* However, if some goods are involved in the transaction and sold, VAT applies on those goods irrespective of service tax on services.
6. **VAT authorities may ask for proof of exemption or classification:**
* Sometimes VAT auditors question transactions where service tax is paid to check if VAT is also payable.
* Correct documentation, contracts, invoices clearly separating goods and services will help.
---
### Your specific case:
* Your client is a trader in **industrial gases** (goods).
* Services rendered under service tax (GTA, renting, maintenance) are taxable under service tax but do **not attract VAT**.
* VAT should be levied only on sale of **goods**, not on services.
* VAT department demanding VAT on service tax paid services is **incorrect**.
* However, if goods are sold along with services, VAT on goods is payable.
---
### Suggestion:
* Submit **clarification letter** with copies of invoices, service tax registration and returns.
* Show that VAT is paid only on goods and service tax is paid on services.
* Highlight relevant VAT & Service Tax laws.
---
If you want, I can help draft a detailed reply or representation letter for the VAT authorities. Would that help?
---
### Key points:
1. **VAT and Service Tax are different taxes levied by different authorities:**
* **VAT** is on the sale of goods.
* **Service Tax** is on the provision of services.
2. **VAT is applicable on sale of goods.**
* If your client is trading in goods (like industrial gases), VAT applies on the **sale price of goods**.
3. **Service Tax is applicable on services provided (like GTA, renting, maintenance).**
* This tax is separate from VAT.
4. **No input VAT credit is allowed on service tax paid.**
* Service tax paid on services **cannot be adjusted against VAT** liability.
* They are independent taxes.
5. **Whether VAT is chargeable on items/services on which service tax is paid depends on the transaction nature:**
* If the service tax is paid on pure services (like transportation, renting), VAT should **not** apply on those services.
* However, if some goods are involved in the transaction and sold, VAT applies on those goods irrespective of service tax on services.
6. **VAT authorities may ask for proof of exemption or classification:**
* Sometimes VAT auditors question transactions where service tax is paid to check if VAT is also payable.
* Correct documentation, contracts, invoices clearly separating goods and services will help.
---
### Your specific case:
* Your client is a trader in **industrial gases** (goods).
* Services rendered under service tax (GTA, renting, maintenance) are taxable under service tax but do **not attract VAT**.
* VAT should be levied only on sale of **goods**, not on services.
* VAT department demanding VAT on service tax paid services is **incorrect**.
* However, if goods are sold along with services, VAT on goods is payable.
---
### Suggestion:
* Submit **clarification letter** with copies of invoices, service tax registration and returns.
* Show that VAT is paid only on goods and service tax is paid on services.
* Highlight relevant VAT & Service Tax laws.
---
If you want, I can help draft a detailed reply or representation letter for the VAT authorities. Would that help?
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