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Service tax when equipment is also transferred

02 July 2010

I have a query related to service tax implication in the below mentioned case

- Firm A provides a specialized service to its clients on a long term basis.

- To provide the service it needs to install a computer alongwith the software in the client premises

- The computer is also transferred to the customer in the books

What would be the service tax & VAT liability in such a case. The billing is to be done annually in advance. The computer forms approx 50% of the first year cost to be charged to the customer.

Regards

Harpreet

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2 Replies

Jeevesh Mehta (Advocate- Corporate Commercial & Indirect Tax Advisory) (861 Points)
Replied 03 July 2010

HI,

the billing for the service part and the equipment part should be seprate.

Or in a single invoice both the parts should be clearly demarcated.

Charge Service Tax on Service part and charge VAt on equipment supply part.

Regards

Jeevesh Mehta

Maven Legal LLP

Ph:981617186

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harpreet singh (GM) (25 Points)
Replied 06 July 2010

This is a bundled service and we do not want to disclose the exact cost of the equipment to the customer.

Is there a way to show the tow items in one invoice. For example can we show that the equipment is transferred free of cost to the customer and charge them for the service ?

Regards

Harpreet