The Hindu : New Delhi News : 2 % extra sales tax now on leasing of services

Online edition of India's National Newspaper
Friday, Sep 17, 2004

New Delhi

New Delhi

2 % extra sales tax now on leasing of services

By Our Staff Reporter

NEW DELHI, SEPT. 16. The residents of the Capital would now have to pay more for leasing of various services and use of goods as the Delhi Government today notified the Delhi Sales Tax on Right to Use Goods Act. From engaging a caterer to hiring a tentwallah, hiring of vehicles, air-conditioners, leasing of machines, mobile and landline phone companies and other related services, all will invite a 2 per cent extra tax.

The Act had been hanging fire for almost the past two years but has finally seen the light of the day despite tough resistance from various lobbies, including the political leadership at various levels. The Act had again run into trouble a fortnight ago following a decision of the Finance Department to raise the exemption limit from Rs. 4 lakhs as provided for to Rs. 5 lakhs. However, the notification issued today makes it clear that the limit remains Rs. 4 lakhs only. The Act provides for levy and collection of tax on the transfer of the right to use any goods for any purpose for cash, deferred payment or other valuable consideration in the Capital. This new tax is expected to earn Rs. 70 to Rs. 80 crores in the remaining part of the year.

According to officials of the Sales Tax Department, this tax would be levied on those providing tent and catering services, leasing out machines, giving air-conditioners, coolers and other such equipment on hire, rental of vehicles and renting of movable goods. Dealers transferring, leasing, renting out any services and having an annual turnover of more than Rs. 4 lakhs are required to get registered with the Sales Tax Department. Transferee or lessee should deduct tax at source at the rate of 10 per cent and issue a Tax Deduction Certificate to the transferor or lesser and deposit the tax to the Government. The dealers would be required to file quarterly returns in form IV along with tax challan in Form V.

Interestingly, all the adjoining States including Haryana, Uttar Pradesh and Rajasthan have already implemented the Act and are reaping a rich harvest. The Uttar Pradesh Government was able to generate nearly Rs. 100 crores from the mobile and landline phone companies alone. The Act acquired more teeth after the Uttar Pradesh Government won a case against the phone companies in the Supreme Court that held the Act valid.

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