Tds on rent of equipment

Hi !!

My vendor has rented me a Generator (Equipment) on a monthly rent. He has kept the DG set at our premises and we are using it and are possessing it. He charges VAT on his billings.

1. Whether VAT or Service Tax needs to charged ??

2. As he charges VAT, and as per IT rules I need to deduct TDS @ 2% on rent. Should I deduct TDS even if he charges VAT, as that would tantamount to sale of goods and not services.

Please advice asap

Thanks

CA Satyen Sharma

+91 9769993923