No Retrospective VAT on Lease of Taxi Cabs/ Buses
IN 2008, the cabs in Hyderabad went off the roads protesting against the notices by the State VAT department levying VAT on lease of cabs, even though they were paying Service Tax. The State Government assured the cab owners that a committee would be formed to look into the applicability of VAT on the business transactions and come out with clear-cut guidelines. If VAT is found applicable by the committee, it will be effective with prospective date to be notified.
But by Ordinance No. 7 of 2011, the State Government imposed VAT with retrospective effect from 1.4.2005. The Government's decision was strengthened by a decision of the AP High Court in
The agitated Cab owners again approached the State Government. And a benign Government has decided to waive the tax till 7.11.2011.
The Government Memo states:
++ Government has noted that an element of doubt existed among the taxi cab/bus owners about the taxability of the transaction involving transfer of right to use the vehicles in view of differing Court decisions on the issue.
++ Hence keeping in view all the attendant circumstances and legal position on the issue, Government have decided, as a special case, to waive the VAT demand on transactions involving transfer of right to use taxi cabs/ buses up to 7th November, 2011 provided the vehicle owner has paid Service Tax to the Union Government and has not collected VAT from the customer (lessee/ hirer of the vehicle).
++ However, VAT should be levied and collected on all such transactions with prospective effect from 08-11-2011.
++ Cases in which VAT dues have been already paid shall not however be reopened nor the taxes refunded.
So, from 8.11.2011, they have to pay both VAT and Service Tax?