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VAT on Hire Charges

Anoop (Service) (345 Points)

19 March 2009

Our co. has taken genset from a vendor and pay monthly rent for supply of electricy in case of power failure. Now, the vendor raised bill for monthly hire charges and also charged vat @ 12.50% in the state of Delhi. Can they charge vat? If yes, pls. reply under which sections, they can charge?

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9 Replies

CA CS CIMA Prakash Somani (Landmark Group) (23502 Points)
Replied 19 March 2009

They can not charge VAT as it is not a sell. But they can charge you service tax and if rent amunt exceeds RS 120000 p.a. then you need to deduct TDS on payment.

Anoop (Service) (345 Points)
Replied 19 March 2009

Originally posted by :CA CS Prakash Somani (A helping Hand)*
"	They can not charge VAT as it is not a sell. But they can charge you service tax and if rent amunt exceeds RS 120000 p.a. then you need to deduct TDS on payment.	"

But, the vendor charged sales tax 12.5% by raising Retail Invoice and in support of their claim, they have also given us copy of 2 order which has passed by commissioner, VAT Delhi. As per the orders, the commsioner remarked as "So far as 'sale' or 'supply' of Diesel Generating sets on hiring basis to outstation parties by the dealer is conerned the same would attract provisons of the central act and as and when such sale or supply on hiring basis or otherwise is made against 'C' form by the dealer it would attract tax at the rate of 4% otherwise in the absence thereof the tax rate would be 12.50%." Pls. clarify.

PATNANA RAMESH (MANAGER (INDIRECT TAXATION)) (28 Points)
Replied 23 March 2009

Charging VAT is correct in the concept of right to use, once they charge VAT they will not charge the Service Tax, the VAT which they charged on you is creditable under input tax

Anoop (Service) (345 Points)
Replied 24 March 2009

Dear Patnana, Thanks for reply. Are u sure that I can take input credit on it becuase for taking input credit, vat(tax) should relate directly to the products and it is indirect expenses? Clarify.

Vishnu.G (Executive accountant) (22 Points)
Replied 14 July 2010

Our co. has taken Furniture from a vendor and pay monthly rent . Now, the vendor raised bill for monthly hire charges and also charged vat @ 12350% in the state of Karnataka. Can they charge vat? If yes, pls. reply under which sections, they can charge

Vishnu.G (Executive accountant) (22 Points)
Replied 14 July 2010

Originally posted by : Vishnu.G
	Our co. has taken Furniture from a vendor and pay monthly rent . Now, the vendor raised bill for monthly hire charges and also charged vat @ 13.50% in the state of Karnataka. Can they charge vat? If yes, pls. reply under which sections, they can charge