Commercial Property Let out

This query is : Resolved

Lakshmi (Querist)
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30 October 2007 Letting of Commercial Property is taxable w.e.f. 01/06/2007.There exists a provision that if the value of aggregate taxable services provided in the previous year does not exceed Rs 800000, service provider would enjoy exemption in the current year upto Rs 800000 of receipts. There is a Company in whose case,rent charged during the year 2005-2006 exceeds Rs 800000.
Will the Co still enjoy exemption in the current year 06-07 since the services were not at all taxable during 05-06 (Services became taxable w.e.f.01/06/2007)

KAAPIL

KAAPIL (Expert)
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31 October 2007 High Court has given stay order on service tax on letting of commercial properties.

Ravikumar.G

Ravikumar.G (Expert)
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08 November 2007 The Madras High Court has granted an interim injunction restraining the Union Finance Ministry from collecting service tax on rent of commercial buildings following a petition filed by General Star Kitchen Pvt Ltd, which operates a restaurant in Chennai Citi Centre. In the order dated October 9, the court has granted two weeks injunction. The case has been posted for hearing on October 22. The order has evoked the interest of developers and landlords who have been affected by the Union budget levying 12 per cent service tax on rent or lease of commercial space. Those particularly affected are the owners who have leased space to retailers and information technology companies, say real estate developers.While the manufacturing sector is able to treat the tax as input credit and pass it on, the retailers and other service providers find the new tax eating into their margins, they say.The petitioner has challenged the levy of service tax on the grounds that the Union Government has no power to levy any tax on rentals accruing from building in the form of service tax or otherwise. Such a levy is a tax on rent, which in turn is a tax on property. Under the Constitution, only the State Government has the exclusive power to levy tax on land and building.The petitioner has also submitted that there is no service involved in letting out immovable properties. The Union Government is attempting to levy a tax on service, which it is not entitled to under the federal framework of the Constitution.The petitioner has also argued that the Government has drawn a distinction between letting properties to business or commerce, on which the service tax is levied, and other leases. There is no distinction between the landlord who lets out property for a commercial purpose or otherwise. So, the distinction is hostile and discriminatory and violates the fundamental right of equality under law

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KAAPIL

KAAPIL (Expert)
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08 November 2007 Very informative and deatiled.

Dayal

Dayal (Expert)
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12 November 2007 In so far as the ruling is awaited, this service is taxable as of today.

The exemption cannot be availed as the rules state that previous financial year the income on account of taxable services rendered should not exceed 8 lacs.

You may pay the amount under protest, in case the order is favourable you can file your refund claim, in case it is not favourable atleast you escape the interest provisions.

You may kindly evaluate your position accordingly