News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
« General »
 The tax matter India must not cede ground on
 Small savings schemes: Look at post-tax return before deciding to invest
 Financial services firms come under taxman’s scanner
 Filing Income Tax Return Using Aadhaar Leads To Allotment Of Aadhaar. Read Latest Rules Here
 If you are not paying income tax, get ready for I-T department's call
 Five things to expect from GST Council meet in Goa today
 Are steps on personal income tax coming?
 Here is how the tax cuts will help sectors
 You may not get tax refund if you haven’t validated your bank account
 Senior citizen tax benefits: From income tax to pension – 10 exclusive points explained
 RBI panel pitches for federal body like GST Council in farm sector

You may be paying higher tax on annual maintenance bills
April, 29th 2019

Conflicting rulings from tax authorities of advance rulings in different states on applicable goods and services tax rate on annual maintenance contracts have caused considerable confusion in the industry.

The various Authorities of Advance Rulings (AARs) have pegged GST on annual maintenance contracts (AMCs) that companies offer to customers of various products and equipment at 12%, or 18%, or even 28%, industry experts said.

Latest one on Thursday from appellate authority for Advance Rulings in Rajasthan has further added to confusion. It upheld AAR’s decision that taxability of services provided on customer's equipment under comprehensive maintenance services agreement and equipment parts supply and services agreement which includes supply and replacement of spare parts to be taxed at chargeable applicable rates of 12%, 18%, 28% which ever is higher.

AMCs are common practice for maintenance of all household consumer durables and in some cases even automobiles. Also, companies across different industries take up AMCs for maintenance of their large machinery.

The situation is particularly worrying companies that rely on AMCs for maintenance of their equipment, experts said.

They fear that tax authorities may question industry on treatment of these contracts. Also, AMC service providers are unsure as to what is the rate of tax they should collect from consumers.

Authority for Advance Rulings helps taxpayers ascertain their tax liability in advance. But AARs of different states have given divergent rulings on applicable GST on AMCs with some considering them as ‘composite supply’ and some as ‘works contract’.

This has prompted experts to seek clarity from the central government.

“With conflicting AARs on taxability of AMC contracts, the need of the hour is for the government to come out with a circular covering all varieties of maintenance contracts and providing guidelines on taxability in each case,” said Harpreet Singh, partner at KPMG.

Experts said the pre-dominant intention of AMCs is service, though goods form a major part of the contract value.

“From a consumer standpoint, the intention behind entering into a maintenance contract is to avail uninterrupted services of any product,” Singh said. “Accordingly, in my view the correct treatment of an AMC contract is to treat the same as service and tax accordingly.”

In a ruling, Uttar Pradesh AAR had termed AMC as a ‘composite contract’ that includes supply of services and goods both, and held it will face 18% GST. Principal supply of service and goods is merely incidental to the maintenance contract, it had said.

Maharashtra AAR on a plea relating to taxability of an AMC ruled that keeping customer's engines in good working condition was a 'composite supply' with provision of services being principal supply. It held that since the contract involved supply of two or more goods or services together in the normal course of business, it would constitute ‘composite supply', implying a rate of 18%.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2019 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Desktop Application Development Outsourcing Desktop Application Development Offshore Desk

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions