Charging service tax
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
06 June 2013
Dear Experts,
Service tax registration is obtained voluntary i.e before turnover crossing 10 Lakhs....
Now in case of rented premises (Service category is renting of immovable properties) is it allowed that service tax is charged to some tenants and not to others...
Service tax registration is obtained voluntary i.e before turnover crossing 10 Lakhs....
Now in case of rented premises (Service category is renting of immovable properties) is it allowed that service tax is charged to some tenants and not to others...
06 June 2013
It is good that you have taken RC voluntarily. Once you started charging service tax in the bills after obtaining RC you cannot avail exemption on one tenant and collect from other tenant.
Please note that only rental income from commercial purpose is taxable.
Municipal tax paid on your proprerty is allowed for deduction while remitting service tax on rental income from the particular immovable property.
Please note that only rental income from commercial purpose is taxable.
Municipal tax paid on your proprerty is allowed for deduction while remitting service tax on rental income from the particular immovable property.
Querist : Anonymous
Querist :
Anonymous
(Querist)
06 June 2013
Thanks sir.....But what abt Municipal Tax in foll cases:
- Premises is given to more than 1 tenant...then it can be adjusted against total service taxable value?
- If entire premises is not given on rent i.e. only partly rented then how to arrive at municipal tax paid benefit...is it based on area?
- Premises is given to more than 1 tenant...then it can be adjusted against total service taxable value?
- If entire premises is not given on rent i.e. only partly rented then how to arrive at municipal tax paid benefit...is it based on area?
Querist : Anonymous
Querist :
Anonymous
(Querist)
06 June 2013
Thanks sir.....But i have some queries with respect to a practical case...
- Since only commercial property is taxable..in my case ground floor of a premises is rented for commercial purpose whereas 1st floor of the same premises is rented to the same company for residential dwelling of its staff...with seperate agreement...then is service tax applicable on both?
- Also municipal tax paid can be claimed proportionately i.e entire premises is not rented....based on area benefit can be taken?
- Since only commercial property is taxable..in my case ground floor of a premises is rented for commercial purpose whereas 1st floor of the same premises is rented to the same company for residential dwelling of its staff...with seperate agreement...then is service tax applicable on both?
- Also municipal tax paid can be claimed proportionately i.e entire premises is not rented....based on area benefit can be taken?
19 July 2024
Let's address each part of your query regarding service tax implications for renting of immovable properties:
### 1. Charging Service Tax to Tenants
- **Selective Charging:** Yes, it is permissible to charge service tax to some tenants and not to others, based on whether they qualify as taxable services under the Service Tax rules. Service tax is applicable only when the premises are rented for commercial or industrial purposes. Residential renting does not attract service tax.
- **Adjustment of Taxable Value:** If the premises are given to multiple tenants for both commercial and residential purposes, service tax should be charged only on the portion of rent attributable to commercial use. The taxable value should be adjusted accordingly.
### 2. Calculation of Service Tax for Partially Rented Premises
- **Municipal Tax Benefit:** Municipal taxes paid can be claimed as a deduction from the taxable value of the service provided. This deduction is applicable proportionately based on the area used for commercial purposes compared to the total area of the premises.
- **Example Scenario:** If the ground floor of a premises is rented out for commercial use and the first floor is rented for residential purposes to the same company, with separate agreements:
- Service tax will apply only to the rent received for the ground floor (commercial use).
- The rent received for the first floor (residential use) will not attract service tax.
- Municipal taxes paid can be claimed as a deduction from the service tax liability, proportionate to the area used for commercial purposes.
### Conclusion
- Ensure that service tax is charged appropriately based on the nature of the use (commercial or residential).
- Municipal taxes paid can be claimed as a deduction from the service tax liability, proportionate to the area used for taxable commercial purposes.
- Maintain separate agreements for commercial and residential uses to clearly delineate the service tax applicability.
For specific details and compliance, it's recommended to consult with a qualified tax advisor or a chartered accountant who can provide tailored advice based on your specific circumstances and ensure compliance with Service Tax regulations.
### 1. Charging Service Tax to Tenants
- **Selective Charging:** Yes, it is permissible to charge service tax to some tenants and not to others, based on whether they qualify as taxable services under the Service Tax rules. Service tax is applicable only when the premises are rented for commercial or industrial purposes. Residential renting does not attract service tax.
- **Adjustment of Taxable Value:** If the premises are given to multiple tenants for both commercial and residential purposes, service tax should be charged only on the portion of rent attributable to commercial use. The taxable value should be adjusted accordingly.
### 2. Calculation of Service Tax for Partially Rented Premises
- **Municipal Tax Benefit:** Municipal taxes paid can be claimed as a deduction from the taxable value of the service provided. This deduction is applicable proportionately based on the area used for commercial purposes compared to the total area of the premises.
- **Example Scenario:** If the ground floor of a premises is rented out for commercial use and the first floor is rented for residential purposes to the same company, with separate agreements:
- Service tax will apply only to the rent received for the ground floor (commercial use).
- The rent received for the first floor (residential use) will not attract service tax.
- Municipal taxes paid can be claimed as a deduction from the service tax liability, proportionate to the area used for commercial purposes.
### Conclusion
- Ensure that service tax is charged appropriately based on the nature of the use (commercial or residential).
- Municipal taxes paid can be claimed as a deduction from the service tax liability, proportionate to the area used for taxable commercial purposes.
- Maintain separate agreements for commercial and residential uses to clearly delineate the service tax applicability.
For specific details and compliance, it's recommended to consult with a qualified tax advisor or a chartered accountant who can provide tailored advice based on your specific circumstances and ensure compliance with Service Tax regulations.
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