NOTE ON AMENDMENTS IN

AMENDMENTS IN WEST BENGAL SALES-TAX ON LEASES:1999-2000

NOT AS SWEET AS IT LOOKED

Vinod Kothari

With the full details of the changes on lease taxation in West Bengal to hand, things do not look as rosy as they did based on the Minister's speech. However, there is a positive move towards making the State more leasing-friendly.

Here are the significant changes:

The revised rate of 4% as against earlier rate of 7% + surcharge is applicable only to "plant and machinery".
On items other than plant and machinery, there is no special rate specified now: in other words, the rate of tax applicable on the sale of the relevant goods will apply. For example, if it is a computer, the rate of tax on the lease will be 5%, and if it is an air-conditioner , the rate of tax will be as high as 20%. Hence, the goods rates are applicable now.
The general scheme of tax in the State has now been made single point by shifting all items capable of being leased/hired into Schedule IV. Please note that in West Bengal, it is not necessary, in order to avail the benefit of first point tax, to prove that the goods have already suffered tax in the State. That is to say, even if the goods have been bought from an unregistered dealer, though purchase tax under sec. 14 @ 4% will be applicable, there is no further tax for items listed in Schedule IV.
The general rate of tax on plant and machinery is now 7%.
A dealer in West Bengal making a sale of plant and machinery to a leasing company will charge a concessional rate of 4%. The rules for this are to be formulated, which would most likely require the registration of the leasing company and issuance of a declaration.
As to what is meant by "plant and machinery", please note the sales-tax definition is not as wide as in income-tax law. In sales-tax parlance, only items taken in common parlance as plant or machines will fall in this category.

In essence, the impact of the changes can be seen in the following situations:

Lease:

	New law	Earlier law
Leases done already before 1st April, rentals received after 1st April	No change	Rentals taxable for intra-state leases as per old law
Leases done w.e.f 1st April, plant and machinery, locally bought	Leasing company pays 4% tax on purchase No tax on lease	Leasing company pays 2% tax (against Form 11) + 8.05% tax (3% against form 12)
Leases done w.e.f 1st April, plant and machinery, bought from another State/ country	We re-affirm our contention that such leases are inter-state/import leases, outside the jurisdiction of the State. However, if taxed, taxed at 4%	We re-affirm our contention that such leases are inter-state/import leases, outside the jurisdiction of the State. However, if taxed, taxed at 8.05% (3% against declaration in Form 12)
Leases done w.e.f 1st April, motor vehicles, locally bought	Leasing company pays normal commodity rate of tax No tax on lease	Leasing company pays normal commodity rate of tax No tax on lease
Leases done w.e.f 1st April, motor vehicles, bought from another State	We re-affirm our contention that such leases are inter-state/import leases, outside the jurisdiction of the State. However, if taxed, taxed at the applicable commodity rate.	We re-affirm our contention that such leases are inter-state/import leases, outside the jurisdiction of the State. However, if taxed, taxed at 8.05%.
Leases of motor vehicles bought from unregistered person, say an individual who is not a dealer in vehicles	We are of the view that the provisions of purchase tax not applicable in this case as the seller is not a dealer. No tax on the lease	We are of the view that the provisions of purchase tax not applicable in this case as the seller is not a dealer. No tax on the lease
Leases of motor vehicles bought, evidence of purchase from the State not available	Lease taxable at commodity rate	Lease taxable at 8.05%
Lease of computers locally bought	Leasing company pays commodity rate of tax No tax on lease	Leasing company pays commodity rate of tax No tax on lease
Lease of computers bought from outside the State	Subject to our contention as to inter-State lease, taxable at commodity rate	Subject to our contention as to inter-State lease, taxable at 8.05%
Lease of airconditioning equipment locally bought	Leasing company pays commodity rate of tax (20%) No tax on the lease	Leasing company pays commodity rate of tax No tax on the lease

Hire-purchase:

	New law	Earlier law
HP done already before 1st April, rentals received after 1st April	No change	Rentals taxable for intra-state HPs as per old law
HPs done w.e.f 1st April, plant and machinery, locally bought	HP company pays full commodity rate of tax on purchase No tax on HP	HP company pays 2% tax (against Form 11) + 13.8% tax (3% against form 12)
HPs done w.e.f 1st April, plant and machinery, bought from another State/ country	We re-affirm our contention that such HPs are inter-state/import HPs, outside the jurisdiction of the State. However, if taxed, taxed at commodity rate of tax, viz., 7%	We re-affirm our contention that such HPs are inter-state/import HPs, outside the jurisdiction of the State. However, if taxed, taxed at 13.8% (3% against declaration in Form 12)
HPs done w.e.f 1st April, motor vehicles, locally bought	HP company pays normal commodity rate of tax No tax on HP	HP company pays normal commodity rate of tax No tax on HP
HPs done w.e.f 1st April, motor vehicles, bought from another State	We re-affirm our contention that such HPs are inter-state/import HPs, outside the jurisdiction of the State. However, if taxed, taxed at the applicable commodity rate.	We re-affirm our contention that such HPs are inter-state/import HPs, outside the jurisdiction of the State. However, if taxed, taxed at the normal commodity rate.
HPs of motor vehicles bought from unregistered person, say an individual who is not a dealer in vehicles	We are of the view that the provisions of purchase tax not applicable in this case as the seller is not a dealer. No tax on the HP	We are of the view that the provisions of purchase tax not applicable in this case as the seller is not a dealer. No tax on the HP
HPs of motor vehicles bought, evidence of purchase from the State not available	HP taxable at commodity rate	HP taxable at commodity rate
HP of computers locally bought	HP company pays commodity rate of tax No tax on HP	HP company pays commodity rate of tax No tax on HP
HP of computers bought from outside the State	Subject to our contention as to inter-State HP, taxable at commodity rate	Subject to our contention as to inter-State HP, taxable at commodity rate
HP of airconditioning equipment locally bought	HP company pays commodity rate of tax (20%) No tax on the HP	HP company pays commodity rate of tax No tax on the HP

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