Example: lease-sale agreement concluded before July 1, 2012 GST legislation appears to have a combined approach to the first and third methods. The legislation treats a lease-purchase contract as a sale and the financing of a party as a service by extending the loan. While the use of goods is an ongoing process and a gradual delivery, rental-sale is legally considered a single delivery by sale. GST processing of rental-purchase is not an easy task. Indeed, it is highlighted by certain uncertainties. These uncertainties depend in large part on the nature of the leases and the apparent absence of a clear legal regime for the processing of leases. After that date, all elements of a new lease, including principal, interest and all other fees and taxes, are taxable, i.e. GST, whether or not the lender discloses the interest component. All purchasers, whether they charge gst by demarcation or cash method, can use the full amount of GST charged either on the first payment or when receiving a tax bill. In Damodar Valley Corporation v. State of Bihar, [1961 AIR 440, 1961 SCR (2) 522] the Hon`ble Supreme Court has determined certain tests to determine whether a lease-sale agreement is contrary to sale:- In the context of a lease sale, ownership of the goods is transferred to the buyer for payment of the last tranche. As a result, GST applies to leasing operations, as it is covered by Entry 1 (c) Schedule II of the CGST Act. In the case of an operational lease, rent is an expense for the taker, whereas in the case of the lease-sale, only interest is considered expenses, while the main one is the cost of assets.
If Albert takes the GST into account on a non-solvent basis, he can apply for a GST credit for the tax period during which he enters into the contract. In other words, for the tax period ending June 30, Albert would receive a GST credit of $3,000 (a weight of $11,000). (II) the element of the sale in the sense that it is considering a sale if the intended buyer meets the terms of the lease. Sir, My qeuerry is: I had purchased a Machine on Hire Purchase in Maharashtra State, Now I have to Shift this Machine to other Branch from Maharastha Branch to Gujarat Branch. How are we going to generate Eway Bill? Who is obliged to generate an e-lane invoice, i.e. the purchase that buys the machine on the rental-purchase of the seller who provides the machine for rent-purchase… abd that is the Value of the machine for E Way Bill. Albert can benefit from a GST credit for the GST, which is included in both the freezer price and the calculated interest rate.
Since the agreement was reached after July 1, 2012, interest does not constitute a financial benefit (even if disclosed separately). If the delivery of goods is a taxable delivery under a lease agreement, the price you pay for the goods includes GST.