• Which tax on machinery rental business - Service tax or VAT?

I have a rental Bussiness, We give the machinery and equipment used in construction like scaffolding, Welding sets, JCB's etc on rent to builders.  Which tax is applicable on my bussiness, Service tax or VAT or None, We are located in Punjab and mostly does business there and As GST Is coming, when should i expect my tax(if any) to be replaced by GST. Please guide
Asked 2 years ago in VAT from Malout, Punjab
Dear Sir,

Service tax is applicable on you if your rental income during an year exceeds INR 10 lacs which I am sure the case is.

Further, as Far as GST is concerned, it will not be applicable until 31.03.2017. Government is trying to put it in place from 1.04.2017. However to is it seems very difficult. We anticipate it somewhere in October 2017.

Please feel free to call/ revert in case of any doubts.

Thanks and Regards
Abhishek Dugar
Abhishek Dugar
CA, Mumbai
2934 Answers
123 Consultations

5.0 on 5.0

Levy of rent / Service tax on supply of machinery on hire/rent would depend on whether along with the right to use the machinery, possession and control are also transferred to the user. If possession and control are also transferred the state governments would levy VAT. If only right to use the machinery is transferred then service tax shall be applicable and not VAT. 

Eg : If the machinery is transferred alongwith the operator than this is an example of transfer of only right to use the machinery without transferring the possession and effective control.

Hope this clarifies your query. For any further clarifications you may contact us.


Ria Nagpal
Ria Nagpal
CA, Ahmedabad
46 Answers
3 Consultations

5.0 on 5.0

Hello Sir,

As per the information provided by you, Service Tax shall be applicable in your case.

GST cannot be commented upon as the Govt is still working on it.

Trust this clarifies your query. 

Feel free to call / get back in case of further clarifications. 

Thanking You. 

Rohit R Sharma

Rohit R Sharma
CA, Mumbai
2104 Answers
91 Consultations

5.0 on 5.0

Since you are in Business of Letting out of machineries, your business is providing rental service and Service tax is applicable if your receipts are more then 10 lakhs rupees.
GST is expected to come from 1st april optimistically, and the transition will require some expertise.
Please contact once GST is out in public to guide you
Jayesh Rathi
CA, Ahmedabad
5 Answers

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