GOVERNMENT OF ANDHRA PRADESH
REVENUE (CT.II) DEPARTMENT

Memo No.42596/CT.II(1)/2011-1

Dated: November 11, 2011

Sub: - CT Department – Demand raised for payment of VAT on lease of taxi cabs/ buses under AP VAT Act 2005 – Certain representation filed for waiver of tax – Orders Issued – Reg.

Ref: 1. Govt. memo No.28812/CT.II(1)/2008-1, Revenue (CT.II) Department, dt.12.6.2008.

2. Representation from Greater Hyderabad Cabs and Bus Operators Association, Hyderabad received through CMP No.1845/ CMP-SM/2011, dt.11.10.2011 along with letter of Hon'ble Minister for Labour Employment.

3. Representative from Greater Hyderabad Cabs and Bus Operators Association, Hyderabad received through CMP No.1893/CMP-SM/2011, dt.17.10.2011 along with letter of Hon'ble Minister of Labour Employment.

4. Representative of Sri NK Sultania, President, Greater Hyderabad Cabs & Bus Operators Association, Hyderabad received through Pri. Secretary to CM CMP No.974/CMP-OV/2011, dated 27.10.2011.

The Greater Hyderabad Cabs and Bus Operators Association, vide representation 2 nd to 4 th cited, have requested the Government not to levy VAT on the Taxi Cabs/ Buses rented out by the members of the Associations to IT/ITEs/ other organizations/ institutions who usually hire the vehicles on monthly/ yearly basis.

2. The Association has also stated that the Government, in the meeting held on 6.6.2008, had given the following assurances.

1.  VAT will not be levied/ applied with retrospective effect.

2.  No coercive action will be taken against the demands already raised.

3.  A committee will 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.

3.It has been further represented by the Association that their business transactions have been assessed to service tax by the Union Government from the date of inception of Service Tax and the proposed levy of VAT @4% under the scheme of composition vide Section 8(B) of the APVAT Act, brought in through Ordinance No.7 of 2011 with retrospective effect from 1.4.2005, is not in line with the assurance given by the Government in June 2008. They have also cited some court judgements in their favour viz, Delhi High Court Order in S.T. Appeal No.10/2009 in Commissioner, VAT, Trade and Taxes Department Vs. International Travel House Limited. They have stated that it would not be possible for them to pay Tax with retrospective effect as they did not collect the same from their customers. Finally, they have requested the Government to consider levy of VAT with effect from 1.4.2012.

4.Government have carefully considered the above representation. In 2008 M/s. Piyush Sultana, Jubilee Hills, a member of the above mentioned Association, filed an application seeking an Advance Ruling on the taxability of Taxi/bus hiring. The Advance Ruling Committee, in its proceeding No.AR.Com/22/21/2008, dt.1.1.2009, under the powers vested by Section 67 of the APVAT Act, clarified that the transactions of Taxi Cab hiring/ Bus hiring are taxable to VAT in cases where there is transfer of right to use the goods and the said aspect has to be determined on a case to case basis having regard to the terms of the relevant contract.

5.Government have also noted the recent judicial findings on the issue in the case of M/s. G.S. Lamba & Sons Vs. State of Andhra Pradesh decided by the Hon'ble High Court of Andhra Pradesh on 28 th January, 2011 [2012-TIOL-49-HC-AP-CT] which has held the levy of VAT on a transaction involving the transfer of right to use Vehicles through a contract as valid.

6. Government has however 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 upto 7 th 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.

7. The Commissioner Commercial Tax Department is requested to take necessary action accordingly.

Asuthosh Mishra
Principal Secretary to Govt.