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Vat on sale of old computer

CA. Rashi Goyal (Chartered Accountant) (512 Points)

21 August 2011

One of our client is service provider ans is registered under service tax act. It is currently providing data processing services to the clients abroad. Now their current computer systems which the having book value of 4 laks needs to be replaced with the latest technology as per client requirement.

Query: Do they require to pay vat on sale of old computer at a price of Rs. 4.5 laks. D they require to obtain the registeration under vat though they need not to sale anything in near future.

Please suggest how to overcome the complexity of vat regsiteration.

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5 Replies

vaibhav (CA & CS) (577 Points)
Replied 22 August 2011

hello Rashi,

in my opinion you should advice ur client to get the vat registration because of following:

1) when ur client will sale the old computers they will have to rasie a tax invoice which will contain the vat amount and the vat collected by your client has to be paid to the goverment and payment to goverment is possible only when ur clinet is registered dealer.

2) and since ur clinet is selling the old computers it is very fact that they will make some new purchase also ( may be computers or any other thing ) against which VAT credit can be setoff by your client

3) By geting registration ur client wll find vendor easily because the vat charged by ur client can be claimed by the vendor. it will be win win situation for both of them.

Regards,

Vaibhav Sisodiya

Subramanya (in practice) (109 Points)
Replied 29 December 2011

Hi Rashi sir,

ua client s replacing his old asset wid the new one so as to serve his client right??

Since ua cllient wants to sell is a Asset and not Stock... thr is no question of VAT..

Pls correct me if my opinion is wrong...

RAJU (LEARNER) (1089 Points)
Replied 03 January 2012

As far as Karnataka is concerned, the applicability will be as below;

1. The Act defines a dealer to include a casual dealer who is not into tradin..

2. Goods include all immovable properties other than news paper. actional claims, stocks, shares.. In view of this even capital asset like a computer system is liable for VAT.

However, Section 22 requires a person to get registered when his taxable turnover is likely to exceed Rs.5 lacs during a year. Therefore, the criteria to register & pay tax arises if the sales crosses the prescribed limit.

In your case, as the sales is likely to be less than 5 lacs, there will be no liability to VAT.

You may please go through the requirements of registration of the State VAT Act in which your client is based.

Hope this clarifies...

RAJU (LEARNER) (1089 Points)
Replied 03 January 2012

Oppssss.... I dint notice that this is a 4 month old post...

Michelle taylor (4 Points)
Replied 02 March 2021

That is a real issue, in my opinion, they must have to get the VAT registration done because of the price of these computer systems i.e four and a half lacks which is quite expensive and needs to be done through proper taxation.