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...

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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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.

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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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?

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