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Rent received through warehousing

Karthy (internal audit) (33 Points)

07 September 2016

Dear sir,

1) if the landlord is letting out his warehouse to a tenant who is clearing Agent dealing with Agricultural Products & Fertilizers -where the tenant is using such warehouse for stocking, loading and unloading of such products,

(a) does the tenant has to pay service tax on the rent what he pays to the landlord(the annual rent paid by the tenant exceeds 10 lakhs.

(b) the tenant says that according to M.I.(D.R)F.No.B11/1/2002-TRU,dT:-01.08.2002- he does not have to pay service tax on rent as he is a Clearing agent.

Thanking you in advance:)

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6 Replies

Karthy (internal audit) (33 Points)
Replied 07 September 2016

1) if the landlord is letting out his warehouse to a tenant who is clearing Agent dealing with Cold Storage Serivce who is a clearing agent for dairy Products -where the tenant is using such warehouse for stocking, loading and unloading of such products,

(a) does the tenant has to pay service tax on the rent what he pays to the landlord(the annual rent paid by the tenant exceeds 10 lakhs.

(b) the tenant says that according to M.I.(D.R)F.No.B11/1/2002-TRU,dT:-01.08.2002- he does not have to pay service tax on rent as he is a Clearing agent.

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177713 Points)
Replied 07 September 2016

There are two types of sevices mixed up here, Service of Renting Warehouse and C&F agency.

For C & F agents:

What are the types of services provided by clearing and forwarding agents which attract Service Tax?

Ans. The levy of Service Tax will applies to services rendered by clearing and forwarding agents, who undertake, among other things, services of receipt, warehousing, despatch, record maintenance and account of goods on behalf of the principal who appoint or engage such agents.

Normally, there would be a contract between the principal and the clearing and forwarding agent detailing the terms and conditions and also indicating the commission or remuneration to which the C&F agent is entitled. A clearing and forwarding agent normally undertakes the following activities on behalf of a principal:

receiving the goods from the factories or premises of the principal or his agents;
warehousing these goods;
receiving despatch orders from the principal;
arranging despatch of goods as per the directions of the principal by engaging transport on his own or through the authorised transporters of the principal;
maintaining records of the receipt and despatch of goods and the stock available at the warehouse;

Service Tax is payable in respect of the above services.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177713 Points)
Replied 07 September 2016

Where as you are providing service of renting of warehouse.

For agricultural activity which are exempted from service tax are as:

Following services relating to agriculture are covered under section 66D (d) (Negative list of Services) of Chapter V of the Finance Act, 1994 and hence no service tax is levied on these services.

services relating to agriculture by way of—

(i) agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing;

(ii) supply of farm labour;

(iii) processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market;

(iv) renting or leasing of agro machinery or vacant land with or without a structure incidental to its use;

(v) loading, unloading, packing, storage or warehousing of agricultural produce;

(vi) agricultural extension services;

(vii) services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce;

As your service does not include " incidental to its use" but to C&F agent service tax is liable to be charged.

Finally, let him bring permission letter to its effect from Commisioner of Exice & service tax.

Karthy (internal audit) (33 Points)
Replied 07 September 2016

Once again my hearty thanks for your instant reply sir.

thank you so much.

sir sorry to trouble you again but ,

i am providing a renting of warehouse service to my tenant and my annual rent received exceeds 10 lakhs from that tenant. so iam collecting service tax from the tenant.

now he says that since he is an Clearing agent he does not have to pay service tax on rent paid to me and he sends me this article which follows "
M.I. (D.R.) F.No. B11/1/2002-TRU, dated. 01.08.2002. storage and warehousing
(F) Clarifications issued by the Board/Ministry: Scope of taxable services : The services provided by public/private warehouses, Central Warehousing Corporation, Airport authorities, Railways, Inland container Depots, CFS, Storage godown and tankers operated by private individuals are covered. The services include space to keep goods, loading/unloading and stacking of goods, keeping inventory of goods, security arrangement, providing insurance cover etc.— However, mere renting of storage premises cannot be said to be in the nature of service provided for storage or warehousing of goods. Essential test is whether the storage keeper provides for security of goods, stacking, loading/unloading of goods in the storage area.—Cloakroom facilities provided at railway stations, bus stations etc. are passenger terminal amenities incidental to rail or road transport and are not taxable. [ For detailed clarification, please refer to M.I. (D.R.) F.No. B11/1/2002-TRU, dtd. 01.08.2002."

he is using the warehouse for stacking,loading & unloading og goods.

Kindly tell me what is right to do about it sir.

thank you so much.