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Applicability of Sales Tax

Saurav (executive) (27 Points)

08 June 2011

Dear Sir,

I have a query that if it is essential for a service provider company to get sales tax certificate whose main service areas is providing only operation & maintenance services for oil pipelines. Company is not selling anything but when purchasing accessories from the vendors either in the form of accessories or in the form of capital items to send at its various sites either it may be in rajasthan,gujarat or in any part of the country than vendors ask for the road permits. In what way company overcome with this matter. Registration is not possible in every state or ask notify the main party from whom he got the contract to issue road permits. it seems doubtful but if it is possible tha what is the procedure.

Kindly elaborate these points.

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5 Replies

Pawan Kr. Tomar (CA) (169 Points)
Replied 09 June 2011

In case company is providing services only, registration in sales tax is not required however registration under service tax is applicable and the company get CENVAT credit of service tax paid on input services and material used providing such services. There is no need to get separate service tax registration in case company have centrilised accounting system.

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Saurav (executive) (27 Points)
Replied 09 June 2011

Dear Mr. Pawan,

Thanks for your views but company is providing operation and maintenace services for crude oil pipelines and during the contract in need of many spare parts and machines for which they purchased from different vendors. Suppose they make their site in Rajasthan and purchasing the material from Delhi than vendor ask for road permit which they don't have. Then how should they overcome from this. I have also heard about composition Tax(Vat) for this. Please provide the brief idea about that and also tell it's applicability.

My main concern is that Sales tax registration is applicable or not and if yes than in what way company proceed further.

Saurav (executive) (27 Points)
Replied 09 June 2011

Dear Mr. Pawan,

My main concern is that Sales tax registration is applicable or not and if yes than in what way company proceed further.

Saurav (executive) (27 Points)
Replied 09 June 2011

Dear Mr. Pawan,

My main concern is that Sales tax registration is applicable or not and if yes than in what way company proceed further.

Pawan Kr. Tomar (CA) (169 Points)
Replied 09 June 2011

Mr. Saurav,

You will be covered under the "Work Contact". As per VAT law on work contract entire contract price can't be subject to VAT but only of property would passed during execution of work contact can be taxed.

If labour and other service charges are not quantifiable then sale price will be the cost of acquision of goods and margin of profit on them prevailing in the trade plus cost of transferring of property in goods and all other expenses in relation thereof.

Tax Rates:

1. Schedule tax-tax is chargable on transfer of property in goods during the execution of work contract at rate prescribed of the concern state VAT Legislation.

2. Composition Rate:- Vat is applicable on entire value of work contact (Currently 4%+1%& and Cess)

under composite scheme input tax credit will not allowed.

For work contract state wise VAT registration is required if work performed in different state. For interstate transfe of goods/property in brances is through a transfer challan having particulars of main office, VAT and CST no.