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Vat + service tax

30 September 2011

A Company( from Maharashtra) has Charged Royalty to My Co. But in Bill the Co. has Charged a monthly lump sum amount of Royalty + Service Tax @ 10.3% on that Royalty amount + Vat On total of Royalty Amount & Sevice Tax @ 5% . I s it Correct to charge both Service tax & Vat on Royalty???

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5 Replies

(Guest)

Hi,

To my knowledge this issue is still not resolved and disputes are pending in SC. Therefore, it might be possible that they are charging both (Service tax & VAT) in order to avoid any penalty for short charging of taxes in future as a result of any judgment of SC or any notification issued by CG on this behalf.

I would request others to throw some light on this critical issue...

My observations are as below-

Overlapping entries :

Under Service Tax, tax is levied on :

>>>temporary transfer or permission to use or enjoy the IPR such as Patents, Trade-marks, Designs, etc.; and

>>>transfer of franchise (representational right) to franchisee to sell or manufacture goods or to provide service or undertake any process identified with franchiser.

Under VAT, tax is levied on :

>>>transfer of right to use Patents, Trademarks, Designs, etc. and franchise.

CA Unnikrishnan Nair N (Chartered Accountant) (2083 Points)
Replied 30 September 2011

IPR service is taxable under service tax. Similarly giving right to use intangible items like patent , trade mark etc. is deemed sale under vat. To conclude on applicability of vat and rate thereof , pl. go through the schedule of VAT law of your state.

CA Jitendra Jain (------) (82 Points)
Replied 01 October 2011

The Major difficulty is that my Company belongs to Raipur(Chhattisgarh), And there is no CST in the bill , now should I take the Credit of MVAT or not & also the amount of MVAT for the year in total is huge.....a

Also if they deeming it both i.e Sale & Service & charging MVAT & Service Tax respectively then my question is why not CST??????

CA Unnikrishnan Nair N (Chartered Accountant) (2083 Points)
Replied 01 October 2011

VAT is on intrastate and CST is on interstate transactions. VAT is admissible credit (subject to conditions) while CST is inadmissible credit.

CA Jitendra Jain (------) (82 Points)
Replied 01 October 2011

Originally posted by : CA Unnikrishnan Nair N
	VAT is on intrastate and CST is on interstate transactions. VAT is admissible credit (subject to conditions) while CST is inadmissible credit.

Sir dats what i m saying... when the transaction is Inter state one i.e between (MAHARASHTRA & CHHATTISGARH), then why they are charging VAT in the bill.