Tax treatment of the sale of maintenance agreement.

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Kurmi (Querist)
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22 October 2012 Dear Sir,

I would need your valuable suggestion on the below transactions. My co is trading in IT PRODUCTS AND SERVICES. My co is purchasing the extended warranty pack from the vendors. It is works contract in nature; Repairs and Maintenance agreement.My co is not liable to provide any service to customers. My vendor is directly liable to provide service to the final customer. My query is related what is suppose to be my tax treatment as it is an sale of intangible service contract. It is not found to be service as I am purchasing and selling the contract, and no contracts are being arranged at the discretion of customer. There is no commission received by my organisation in this transaction. Here I need your suggestions that being a trader of this intangible service whether I am liable to provide Service Tax or VAT to the customer.

Amol S Joglekar

Amol S Joglekar (Expert)
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22 October 2012 01. VAT is applicable as the activity amounts to TRADING. 02. If your customers are purchasing from your company ex shelf, then you may argue to be a NON SERVICE. (In extended warranty, it is seldom a case.... Your company must be going to customers describing how the extended warranty works.... this itself can be regarded as service) The question would be what would be the value of service... a tricky situation.

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