Hiring of d.g.sets & construction equipments

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

08 December 2012 Whether VAT or Service Tax applicable on following transactions?
1.Hiring of D.G.Sets (With Operator)
2.Hiring of D.G.Sets (Without Operator)
3.Hiring of Construction Equipment (With Operator)
4.Hiring of Construction Equipment (Without Operator)

CA.Vinita Gupta

CA.Vinita Gupta (Expert)
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08 December 2012 Service tax is applicable not VAT

Querist : Anonymous

Querist : Anonymous (Querist)

08 December 2012 If anything amounts to Transfer of Right to use goods then VAT is applicable. Hiring without operator will attract VAT. But my doubt is in case of Hiring with operator will it amount to trf of right to use goods or not?

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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28 July 2024 The taxation on hiring of DG sets and construction equipment varies depending on whether the service is provided with or without an operator and the nature of the transaction. Here’s a detailed overview based on the tax laws applicable in India:

### **1. Hiring of DG Sets and Construction Equipment:**

#### **a. Hiring of DG Sets (With Operator):**
- **Service Tax:** Under the Service Tax regime (before GST), the hiring of DG sets with an operator was classified under the category of `Rental of Immovable Property` or `Management, Maintenance, and Repair Services` depending on the context. The applicable Service Tax was **15%** (including cess) before GST was implemented.
- **GST:** Under GST, the hiring of DG sets with an operator is typically classified under **"Supply of Manpower Services"** or **"Supply of Services by way of renting of goods"**. The GST rate applicable is generally **18%** (9% CGST + 9% SGST). The hiring with an operator involves providing a service, so it is treated more as a service rather than a transfer of the right to use goods.

#### **b. Hiring of DG Sets (Without Operator):**
- **VAT/CST:** Under the VAT regime, hiring of DG sets without an operator generally involves the transfer of the right to use the goods. Therefore, it is treated as a sale of goods. VAT is applicable, and the rate depends on the state's VAT laws.
- **GST:** Under GST, hiring of DG sets without an operator is treated as **"Supply of Goods"** and hence subject to **18% GST** (9% CGST + 9% SGST). This is because it is considered as a transfer of the right to use the goods.

#### **c. Hiring of Construction Equipment (With Operator):**
- **Service Tax:** Before GST, this was classified under services like `Maintenance and Repair` or `Supply of Manpower Services`, and Service Tax was **15%** (including cess).
- **GST:** Under GST, the hiring of construction equipment with an operator is generally categorized under **"Supply of Manpower Services"** or **"Supply of Services by way of renting of goods"**. The applicable GST rate is **18%** (9% CGST + 9% SGST).

#### **d. Hiring of Construction Equipment (Without Operator):**
- **VAT/CST:** Similar to DG sets, this typically involves the transfer of the right to use goods, and VAT is applicable based on the state's VAT rates.
- **GST:** Under GST, the hiring of construction equipment without an operator is treated as **"Supply of Goods"** and subject to **18% GST** (9% CGST + 9% SGST). This is considered a transfer of the right to use the equipment.

### **Summary:**

- **Hiring with Operator:** Generally treated as a service, attracting GST at **18%**. It does not amount to a transfer of the right to use goods.

- **Hiring without Operator:** Typically treated as a transfer of the right to use goods, attracting VAT or GST at **18%**.

### **Additional Points:**

- **GST Classification:** The classification under GST can be subject to interpretation based on the nature of the transaction. Ensure to check the latest GST notifications and consult with a tax professional for specific cases.

- **State VAT Laws:** VAT rates and classifications can vary by state, so refer to the specific state’s VAT laws for precise details.

Always consult with a tax advisor or professional to confirm the applicable tax rates and classification based on the specifics of the transactions and current tax laws.