29 October 2011
it is unethical to say no input credit on right to use asper sec 11(4). If there in no input and out put it is income tax not vat. an example i purchased an item for Rs 1000 paid kerala vat of 40 and leased for Rs 100 i collected and paid Rs4 per month so a year Rs 48 + 40 =88 or 48-40=8 .In Vat duplication cannot be tolerated. Other way if the leessee think of buying insted of leasing he can utilise loan interest as expence depreciation and vat input. How to fight this in VAT before GST
29 October 2011
Mr. Verghese, You may note that in Kerala the tax on leasing is reduced to 4%, unlike in other states. This is similar to compounded rate oftax on works contract. On this reduced rate no input tax can be allowed. Take an example: A financing company buys a commercial vehicle say for Rs10 lakhs and pays VAT @ 12.5% i.e.Rs1.25 lakhs.Now the financier's cost is(including his margin and vat)Rs12 lakhs. He can collect tax @4% on the installment amount. He would collect Rs. 48,000/- as vat.Suppose he claims the input tax of credit of Rs1.25 lakhs,he will be gaining Rs77,000/-,which results in a loss to the government.If this provision of reduced rate of tax was not there I/P tax credir could have been allowed.The better way is to go for normal rates of vat even in leasing.
03 November 2011
Thank you for the information but i am not satisfied because there is duplication of KVAT since the vat suffered item is leased again. In service tax for car rental only 60 % is taxed , in our case it is not financing it is pure operational lease,we lease items under 3rd schedule and vat for the same in kerala is only 4 %,we incur expense like Maintainace cost int on loan and the cost.and in sales lease is treated as normal sale so vat cannot be objected only prohibited item are petrol ,diesel and liquor.it is better to include Right to use in that schedule
03 November 2011
IN KERALA VAT form 1 (application) there is a column Nature of business (and as) f. leasing but no where in the KVAT says about leasing . no bill format,How the treat accounts , how the party will account the bill and what is the process when the materials are returned is it sales return. the rate of 4 % is not subsidence the items we sive is only 4 % and in vat why we should be a regular assesse we can compound at 0.5 % on if turnover which is less than 50 lack
CAclubindia
