ON FRANCHISEE ROYALTY ANY VAT IS APPLICABLE OR NOT

This query is : Resolved

naga suri (Querist)
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17 December 2009 Dear Sirs,

I AM TAKEN A FRANCHISEE IT IS SERVICE ORIENTED ONLY I HAVE TO PAY EVERY MONTH ROYALTY ON TOTAL SERVICE VALUE @ 5%
for THIS amt RAISING THE BILL OF FRANCHISOR LIKE THIS
EG:
1. ON TOTAL SERVICES VALUE Rs.100000 @ 5%
5000.00
2. Add:service Tax @10.3% 515.00
TOTAL -------
5515.00
-------
but now they are going to raise vat on the above amount @ 4% whether is it correct or what? is there any law like this or what ? pl.explain.
thanking u
suri

SANJAY JAIN

SANJAY JAIN (Expert)
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18 December 2009 Assuming that despite of payment of service tax on Franchise service, the sales tax authority is asking for payment of VAT.
In this regard it is well settled that the same transaction may not subject to sales tax and service tax because Supreme Court in the matter of Image Creative Pvt Ltd. v/s CCT[2008(9)STR 337(SC)] has laid down the law that Service tax and VAT mutualy excludes each other. So even without going through the concern VAT provisions in this regard, it may be argued that constitutionally VAT is not payble.
For further query, feel free to write sanjayinfbd@yahoo.com (M-09350048731) or visit, HNO. 2489/8,Faridabad(Haryana)