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Retrospective ammendment relating to Service tax on Rent

Satish (CA Final Student) (479 Points)

02 March 2010

A retrospective ammendment is proposed in this budget in respect of service tax on renting of immovable property to give effect to the Delhi high court judgement. Now according to the proposal, the Renting itself is a service and service tax is payable on it. What will happen to the appeal preferred by the department in Supreme Court against the decision given by the delhi high court ? Please discuss the validity as the proposal is placed before the outcome of supreme Court decision.

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4 Replies

CA Pranjal Joshi (CA) (331 Points)
Replied 03 March 2010

Hi,

In my opinion, the Supeme Court may give the decision based on the law applicable on the day when the case was filled. It seems that in order to nullify the adverse decision if at all given by the SC, the Govt has acted proactively to amend the Act.

It is therefore likely that after passing of the Budget 2010 renting of immovable property will become taxable service with retrospective effect from 01.06.2007 unless some one again contests on this revised definition / explanation.

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CA SOURAV KUMAR GANDHI (B.com (H), CA ) (133 Points)
Replied 09 June 2010

Hi sir

I have faced a practical difficulty while auditing the books of a fabrication partnership unit. Service tax on freight (on transportation of material) is payable by payer of freight, where payer may be a consignor or consignee, depending upon the case. In my case freight is payable by auditee (our client), so service tax liability is also upon them.

but what will be the situation if the transportation charges (on shifting of fixed assets, machines, and all other things except material) are paid. Whether there will be service tax liability on our client.

help me in this case, so that i can proceed.

CA SOURAV KUMAR GANDHI (B.com (H), CA ) (133 Points)
Replied 09 June 2010

Sir, one more situation i faced, for which i need ur help.

Ex: suppose our total transportation charge is Rs. 20000, out of which supplier has paid Rs. 4000 as advance to transporter, and charged such advance to us in the invoice raised by the supplier (indirectly whole Rs. 20000 is beared by us) , then on the arrival of material we have paid the balance i.e. Rs. 16000 after deducting TDS, suppose the final payment made by us is Rs. 16000-2%(TDS).

Sir my question is service tax will be payable on what amount?

Jeevesh Mehta (Advocate- Corporate Commercial & Indirect Tax Advisory) (861 Points)
Replied 09 June 2010

Dear Sourav,

Service tax is payable on payment bases. You have to pay the service tax on Rs 4000/- received as advance in the month of its receipt and have to pay the balance ST on Rs 16000/- as and when it is received.

Regards