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Vat on rent

Vishal P. Deshmukh (Officer Accounts & Finance) (53 Points)

19 April 2013

Vat is applied on Invoice @ 12.5% for Lease and rent charges of machinery and equipments, (MAHARASHTRA STATE), Is it ok to pay or not, and If ok please give details.

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6 Replies

Rajiv Limbachiya (Deputy Manager) (140 Points)
Replied 19 April 2013

As per my knowledge, Service Tax will applicable instead of VAT.

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(Guest)

VAT is applicable on Lease and Hire purchase of machines... You have to pay and take credit for the same..

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CA ASHISH SHAH (CHARTERED ACCOUNTANT) (353 Points)
Replied 19 April 2013

As per article 369 2a of act, it is deemed sale and chargeable to VAT.

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K.Gnanasekaran (Executive) (33 Points)
Replied 19 April 2013

Only if the effetive control and possession of the said machinery is given it is liable for VAT. That means mere transfer of possession is not enough but right to use it absolutely is important to decide whether it is hire/lease or mere service contract. The lessee should have absolute freedom to use the goods transferred. On the other hand if the said goods is transferred for a particular period for a particular purpose, then it is only service and not lease.

e.g. If a pedestal boat or a Dashing Car is rent out in a Entertainment Theme Park to enjoy riding self or driving the dashing car self for a particular time then it is only Service and not lease, because here no absolute right to use the goods is given. You can use the above goods only for riding within the premises and for a particular pupose only. This is not hiring or leasing to attract deemed sale tax.

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