Vat on leased machine

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

01 June 2012 My client is hospital run by a charitable trust. It has purchased one sonography machine and installed it in his premises. This machine requires license for purchase and operation.It is purchased on the recommendation of one doctor and as the doctor does not have the required license, it is purchased by the hospital and payment is also done by the hospital. Now the hospital has deducted the payment made for the purchase of machine of Rs. 3,74,000 from the consultancy charges of the doctor and decided to show in its book as advance lease rent received. No formal agreement is entered into. Will it be ok? Is MVAT is applicable on lease rent and at what rate? If yes, whether it will be chargeable on whole amount or on yearly rental which will be distributed over its useful life? Are there any other provisions applicable. Auditor of doctor is asking for certificate for this deduction from the hospital? Please guide me as early as possible.

MJ Krishnamurthy

MJ Krishnamurthy (Expert)
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04 June 2012 Mr Author,
Now, it depends whether this hospital is a dealer registered under MVAT Act.Generally,hospitals are not dealers.In that case this money,already received from/charged to the doctor is a sales receipt.No further chance of traeting it as lease rentals.As the hospital has already sold the machine it has to issue a document for it either a letter or an invoice.For a hospital registered under MVAT Act tax liability arises @ the normal rate. If it is unregistered then no vat liability as the amount falls below the threshold level.There is no harm in issuing a certificate of sale to the doctor.....MJK

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