"As per the Union Budget 2001, a five per cent service tax has been levied on leasing and high purchase receivables," says Association of Leasing and Finance Services (ALFS)' executive director, Mahesh Thakkar, who adds that "leasing and high purchase transactions have been defined as a sale" in the Constitution under Article 366(29A).

Said Mr Thakkar: "We have already paid sales tax on leasing and high purchase since 1982. A particular transaction, if it is a sale, can never be a service. There cannot be a sales and service tax on the same transactions at any point of time." Mr Thakkar further said that the service tax is not imposed on private financiers or other means of financing. This has been introduced only in leasing and high purchase receivables, especially in a situation where industry is down, and margins are hardly over 2-3 per cent. "Above that, we have to pass it on the customers which becomes uncompetitive for them and unremunerative for us," Mr Thakkar said.