Hire Purchase as Sale

Hire purchase, though not sale in the true sense, is deemed to be sale. Such transactions are per se liable to sales tax. The sales tax is payable once the goods are delivered by the owner (hire vendor) to the hirer (hire purchaser), even if the transaction does not fructify into a sale. There is no provision for the refund of sales tax on an unpaid instalment. In other words, full tax is payable irrespective of whether the owner gets the full price of the goods or not.

Delivery Vs Transfer of Property (Taxable Event)

A hire purchase deal is regarded as a sale immediately after the goods are delivered and not on the transfer of the title to the goods. That is, the taxable event is the delivery of the goods and not transfer of the title to the goods. For the purpose of levying sales tax, a sale is deemed to take place only when the hirer exercises the option to purchase.

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