We are Delhi-based traders of stationary items. We sell white board and permanent markers to various retailers in Delhi under our own brand. Our sales, turnover for the current year which is also our first year of operation, is approximately R6 lakh. However, we have sold some office furniture and a motor car for R7.5 lakh. Our local accountant has informed us that since our total sales, including those of furniture and car, are in excess of R10 lakh, we are liable to pay VAT on the same. Please advise.
We assume that you have sold the furniture and motor car within Delhi and accordingly, the provisions of the Delhi VAT Act, 2004 (DVAT Act) would be applicable. Under the DVAT Act, the liability to pay VAT is on a ?registered dealer? or a person required to be registered under the DVAT Act. A ?dealer? has been defined to mean any person who in the course of his ?business? buys or sells goods.
A dealer is required to obtain registration under the DVAT Act if the dealer?s turnover exceeds the ?taxable quantum? i.e. R10 lakh. However, please note that section 18(3) of DVAT Act specifically excludes sale of capital assets to qualify as taxable quantum. Therefore, in case of sale of capital assets, such assets would not be included in the taxable turnover for the purpose of VAT. In case you have treated the old furniture, motor car as capital assets in your books, such sale of old assets should not be included in the taxable quantum.
We are an architect firm based in Delhi and have provided services to one of our clients in relation to the architecture and designing of their hotel located in Jammu. Our local consultant has informed us that since both we and our client have our establishments in New Delhi, we would be liable to pay service tax on the aforesaid services. Please confirm whether the stand taken by our consultant is correct for services provided after July 1, 2012.
With effect from July 1, there has been a paradigm shift in service tax legislation. The taxation based on a positive list of services has been replaced by a negative list regime.
As per the new regime, any service provided in the taxable territory would be liable to service tax unless included in the negative list or notified as exempt. Taxable territory includes whole of India except Jammu & Kashmir.
In the present case, the services rendered qualify as a service and accordingly service tax is applicable. Since the services are taxable, the place of provision of such services needs to be determined as per the Place of Provision of Services Rules 2012 (PoS rules).
As per the PoS rules, generally if the service provider and service recipient are located in the taxable territory, place of provision of the service would be in the taxable territory and would be liable to service tax. However, in case of services related to an immovable property, the place of provision is the place where such immovable property is located.
In the present case, since the hotel is located in Jammu, the place of provision of service is Jammu that is outside the taxable territory. Accordingly, services provided by you would not attract service tax.
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