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Is their any rbi circular on service tax?

Krishna (STUDENT) (136 Points)

07 January 2012

Respected

Is their any Circular/Notification regarding Not to Pay Service tax by Banks to
the tenants on Renting of Immovable House Property?
For example if xyz an individual given his property as rent to pqr bank(may be
branch or office..),
Is PQR Bank should pay service tax on rent to XYZ?
Is their any circular/Notification released by RBI instructing their banks not to
pay service tax to their tenants.

Clarify me is their any circular like that?
and tell me whether bank should pay service tax or not to their Owner of Property
on rent?

Please let me know the answers of my queries?

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5 Replies

CA Prabhat Gupta (Manager (Indirect Taxes)) (821 Points)
Replied 07 January 2012

As Service Tax is an Indirect Tax, Circulars, Notifications, Instructions in this respect are issued by CBEC, Ministry of Finance.

Please note XYZ in your case is the landlord & PQR Bank is tenant.

As per Section 65(105)(zzzz) of Finance Act, 1994 as amended, “Renting of immovable property” includes renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce but does not include —

(i) renting of immovable property by a religious body or to a religious body; or

(ii) renting of immovable property to an educational body, imparting skill or knowledge or lessons
on any subject or field, other than a commercial training or coaching centre.

Hence, renting of Immovable Property by & to a Religious Body and to an educational body, imparting skill or knowledge or lessons on any subject or field (other than a commercial training or coaching centre) have been kept out of purview of Service Tax, but there does not seems to be any exemption for Banks, so far. Hence, in absence of any specific exemption/exclusion, banks would also be treated as other service receivers & Service Tax would be charged from them. The bank should pay Service Tax to owner of the property.

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CA Prabhat Gupta (Manager (Indirect Taxes)) (821 Points)
Replied 07 January 2012

Certain exemptions have been provided to Reserve Bank of India vide Notification No.22/2006-ST dated 31.05.2006, but the same do not apply to all banks. Moreover, Notification covers only those cases where Service Tax is to be paid by RBI either as service provider or service receiver.

Krishna (STUDENT) (136 Points)
Replied 13 January 2012

Thanks Prabhat

But the concerned bank is saying that there is an RBI circular that, not to pay service tax to people who entered into rental agreement before this date. (I didnt remember date). there are saying they should follow guidelines, so only i asked about RBI circular.

Any way Thanks for the Info

CA Prabhat Gupta (Manager (Indirect Taxes)) (821 Points)
Replied 13 January 2012

If you could provide any reference to the RBI Circular, I could possibly help. Ask the Bank to provide a copy of the Circular or atleast the circular Number & date of its issue.