Service tax on lease out of plant and machinary and building

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

01 July 2010 could any bady please let me know that whether the service tax will be applicable to leased out of plant and machinary and building

We have leased out the plant and machinary to our sister concern and to be collect the monthly rent

kindly suggest on this regard

H S Reddy

Srikant

Srikant (Expert)
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01 July 2010 You say you collect the monthly Rent.
The word Rent is a Taxable service under "RENTING SERVICES".

Aditya Maheshwari

Aditya Maheshwari (Expert)
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01 July 2010 I think service tax is applicable on renting of commercial property and not on machinery.

RENTING OF IMMOVABLE PROPERTY SERVICE [section 65(105)(zzzz)]

Applicable w.e.f. 01.06.2007
Tax Rate is 12 plus cess 3 % on rate = Total rate = 12.36 %

SCOPE OF SERVICE

“taxable service” means any Service provided or to be provided(zzzz) to any person,
by any other person
in relation to renting of immovable property
for use in the course or furtherance of business or commerce.

Explanation 1.—“immovable property” includes—

(i) building and part of a building, and the land appurtenant thereto;

(ii) land incidental to the use of such building or part of a building;

(iii) the common or shared areas and facilities relating thereto; and

(iv) in case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate,

but does not include-

(a) vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes;

(b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land;

(c) land used for educational, sports, circus, entertainment and parking purposes; and

(d) building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities.

Explanation 2.—Partly used for residential purposes to be treated as used for business of commerce.

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Shyam Lal Naik

Shyam Lal Naik (Expert)
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01 July 2010 Dear Mr. Maheswari,

The question needs examination from another angle also. Whether the transaction fall under "Supply of Tangible Goods for Use".

Pls opine.

Srikant

Srikant (Expert)
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01 July 2010 Agreed.
But hope these lines will make the topic easier to understand.
1.Immovable property is not exclusively defined.

2.The Act only gives inclusive definition that means Plant and Machinery are immovable property unless they are moveable "as such".

3. Finance Act, 2008 has inserted an explanation to the definition of immovable property to clarify that renting of immovable property shall include allowing or permitting the use of space in an immovable property, irrespective of the transfer of possession or control of such immovable property. The explanation states that the amendment is for removal of doubts. Ministry of Finance had vide Circular No. DOF 334/1/2008-TRU dated 29.2.2008 clarified as under -
"Use of immovable property is allowed for placing vending/dispensing machines in malls and other commercial premises and erection of communication towers on buildings. In such cases, there may or may not be transfer of right of possession or control of the immovable property in favour of the person using such property.”

It is provided in the Budget 2010 proposals to amend the relevant provisions itself to override the decision of Delhi high court In the case of Home Solution Retail India Ltd. v. Union of India [2009]Now the renting itself is deemed as taxable services.

we have to understand as to whether renting of immovable property for use in the course or furtherance of business or commerce by itself is a service. There is no dispute that any service connected with the renting of such immovable property would fall within the ambit of section 65(105)(zzzz) and would be exigible to service tax.

Querist : Anonymous

Querist : Anonymous (Querist)

01 July 2010 Thank you for all, the Service tax whether it is 10% or 12.% kindly let me know

H S Reddy

Shyam Lal Naik

Shyam Lal Naik (Expert)
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01 July 2010 It is 10.30% at present.

Querist : Anonymous

Querist : Anonymous (Querist)

01 July 2010 Thank you Mr Shyam

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