14 January 2009
We are a lessee are having the following Clause in our lease agreement, the agreement was entered before service tax became applicable on rent;
"That the payment of rent as provide herein shall be subject to tax deducted at source as per the Income Tax Act, 1961 and rules framed there under and any other applicable laws as amended from time to time. Any Fresh taxes/additional levies imposed in respect to the rent payable shall be deducted as and when they become applicable."
Given the above clause, we as a Lessee are liable for service tax payment. Please advice.
14 January 2009
Service tax liability is on the lessor only from the department point of view. So it is the lessor duty to pay ST to the Govt. Now it is mutual contract that who will bear the burden of ST. Generally ST is recovered from the lessee.
15 January 2009
As per the cited clause the lessee can deduct tax from rent. As far as Service Tax is concerned it is an addition to the rent. So you cannot escape from the payment of ST on the shelter of the said clause.
CAclubindia
