Applicability of Service Tax on hired Tangible Goods
B. R. Passey
(Querist) 26 October 2009
This query is : Resolved
We intend to procure Tangible Goods on hire for construction of Highway Bridges. Please guide whether Service Tax is applicable on the Hire Charges we are likely to pay in light of our undertaking Highway Bridges construction which is EXEMPTED under Service Tax?
B. R. Passey
AEJAZ AHMED
(Expert) 26 October 2009
Dear Passey,
Your Transaction of Hiring of Tangible Goods shall be liable under service tax;
Kindly Read this Art.
Article 366(29 A)(c)in The Constitution Of India 1949:
(29) tax on income includes a tax in the nature of an excess profits tax;
(29-A) tax on the sale or purchase of goods includes :
(C) a tax on the delivery of goods on hire purchase or any system of payment by instalments;
(d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration;
Further Kindly go through theseJuidgments:
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Agrawal Brothers Vs. State of Haryana and Anr. (1999) 9 SCC 182
" when the assessee had hired shuttering to favour of contractors to use it in the course of construction of buildings it was found that possession of the shuttering materials was transferred by the assessee to the customers for their use and therefore, there was a deemed sale within the meaning of sub−clause (d)
of Clause 29−A of Article 366."
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Hls Asia Ltd. vs State Of Assam And Ors. on 28 March, 2003
http://indiankanoon.org/doc/1980677/
It is observed as
" transfer of property, in goods is the prime consideration in deciding the question whether a particular transaction is sale within the meaning of Sub−section (33) of Section 2. Clauses (ii) and (iv) to Sub−section (33) of Section 2 provide that transfer of property in goods or in some other form in the execution of works−contract and transfer
or use of any goods under an operating lease are also regarded as sale for the purpose of levy of sales tax."
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Bharat Sanchar Nigam Ltd. & Anr vs Union Of India & Ors on 2 March, 2006
http://www.indiankanoon.org/doc/708597/
It is observed as :
" Therefore whether goods are incorporeal or corporeal, tangible or intangible, they must be deliverable. To the extent that the decision in State of U.P. v. Union of India held otherwise, it was, in our humble opinion erroneous. "
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B. R. Passey
(Querist) 26 October 2009
Thanks for such a prompt response.
My wordings have bit confused you on the matter as you have treated the matter as Hire Purchase whereas I intend to have the material on monthly rental from owner of the Tangible Goods.
As I understand from the Service Tax Act, Tengible Goods when tranferred for use by other if attracts Sales Tax / VAT then no Service Tax is payable because the transaction is treated as Sale, otherwise it will be treated as Service proveded and Taxable under Service Tax Act.
My main concern is that as my Output (Construction of Highway Bridges)is Exempted under Service Tax; am I supposed to pay Service Tax on Retal Payable or it will also be exempted?
B. R. Passey
Raj Kumar Makkad
(Expert) 26 October 2009
You will have to pay service tax on retail payable as discribed in detail by Aejaz.
Sachin Bhatia
(Expert) 26 October 2009
Yes your transaction of Hiring of Tangible Goods shall be liable under service tax. You have to pay service tax.
