Query on bas coverage

Queries 822 views 10 replies

Manoj

Employee

36 Points Joined October 2011

Hi All...

Need a help if our below business taxable under the BAS

We have a commercial property which we have rented to a multinational brand of Readymade Garments, and the company inturn has allowed us run a showroom of the same brand in the building, we are having separate agreeement for Rent and for Showroom.

Now the terms of Condition of the Exclusive Showroom of the brand are as below

1. We need to install Furniture as per Specification of the Multinational Company at our own cost, and cannot make

alteration to the showroom without approval from the company

2. We are to buy stocks from the company only that is sold in the showroom

3. We are not allowed to sell competetor brands from the store.

4. We are to Install computer/Software as advised by the company and share data with the company

5. We are to maintain adequate stocks/Manpower so as required to run the showroom

6. We cannot sell stocks at price above MRP

7. We cannot alter the product without company approval

9. Company can turminate our agreement if we do not fulfil the above requirement of the comapany.

We are to buy stocks from the company and make payments to them as per the due dates and the company is not liable to take back the stocks ordered by us even if we are not able to sell them that is to say all the liability of stocks is on us and we have to make payment to the company on due dates, futher we are to bear all the running expenses of the showroom like salaries/Electricity/Telephone and all the rist of Furniture on which we have invested heavely is ours.

We are allowed Margin of 28% on our purchase invoice on which CST is charged and invoiced in our firm name, we inturn sell the stocks on our firm invoice and pay whatever VAT is payable on that sale, which basically is purchase of goods and selling them to the consumer.

I wanna know if the above trading activity that we do governed by the terms and condition as stated above is taxable under BAS as Promotion/Marketing of Goods, we are ok with the coverage of rent under service tax.

Awaiting reply

thanks

manoj

Replies (10)

Madhukar N Hiregange

Chartered Accountant

39039 Points Joined September 2008

It appears that this is a trading activity only as you purchase and sell the goods with some restrictions. ST should notbe attarcted on the same as the difference couldbe a profit or loss and you do not recive any other consideration for the buying and selling of the goods.

Manoj

Employee

36 Points Joined October 2011

Dear sir

thanks for your reply...

Sir we have recevied a show cause from the the Asst. Director of Central Excise Intelligence towards coverage of our activity as taxable under BAS services....sir can u pl suggest some case laws or clarification to prove that it is just a simple sale and purchase and not promotion of goods...

regards

manoj

9414054033

Originally posted by : Madhukar N Hiregange

U S Sharma

glidor@gmail.com

21068 Points Joined January 2010

1) rental incomes are taxable service,

2) Here the VAT plays a major role, if the stock is sold to yourself with vat and you cnarge vat on clients, then the transaction is pure sale, but if the vat is not a valid role in your transactions then you are just clearaing agent/franchise of the principal.

Manoj

Employee

36 Points Joined October 2011

dear sir

we are being billed by charging CST @ 2% against which we issue C-Form and we inturn bill the same to customer and collect vat on the same which we deposit to the sales tax dept..

thanks

regards

manoj

U S Sharma

glidor@gmail.com

21068 Points Joined January 2010

payment of vat on such sales confirmes the transaction as sales, hence it is not the part of service tax. however the rental income is subject to service tax.

Manoj

Employee

36 Points Joined October 2011

dear sir

we are paying service tax under protest on rent..

can u please provide me with same case laws to help me reply to the authority that the amount i am earning is from pure trading and nothing to do with service tax....

thanking you in anticipation

manoj

U S Sharma

glidor@gmail.com

21068 Points Joined January 2010

you have to reply to the officer who has issued scn, under copy to your range superintentent.

R/O will ask for your annual trial balance, profit and loss and balance sheet, and will refer the same to audit wing, audit will get deputed and they will scurtinize the records and issue instructions to the R/O,

However once the sale has taken place with imposition of vat ( as mentioned by you), service tax is not in picture unless some more agreement based transactino is done.

Manoj

Employee

36 Points Joined October 2011

thanx for the reply sir..we have been asked by the DGCEI (directorate general of central excise intelligence) to reply to the commissioner appeals...we shall reply stating that its pure sale as we buy goods and sell then and pay vat accordingly....will update after we hear from them..

regards

manoj saraogi

Madhukar N Hiregange

Chartered Accountant

39039 Points Joined September 2008

Some case laws you canuse are: Imagic Creative where it states that VAT and ST are mutually exclusive.

BSNL decision which talks of what is a service and what isa sale. Another BSNL decision that on the value of sale there shall be no servic etax payable. All are supreme court.

For replyingto SCN you need to engage an expert to avoid missing some vital legal argument.

Manoj

Employee

36 Points Joined October 2011

thanx sir...

we have hired a legal professional to reply to the show cause...all the suggestion received from the experts here will help us reply in a perfect way and make our case strong

thanks a lot sir

regards

manoj