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Service tax on locker rent

SHIVANG (Practicing CA) (124 Points)

14 September 2012

Hello Professional Friends,

Service tax rate has been increased from 10.30% to 12.36% from 1st April 2012.

Fact:

An advance payment of locker rent for the five years has been made in the year 2007 which is ending on December 2012. and bank is demanding difference amount of increase in service tax rates.

Question:

Whether amendment in rates are applicable on advance payments?

Whether Bank can demand such difference when the whole payment is made in advance.

If possible, kindly inform me paras n related circulars, so that I can refer to them.

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1 Replies

Vikas (CA) (1135 Points)
Replied 14 September 2012

Good News my friend,

There are two points to be noted

1. no service tax is liable on the locker rent as per point 6.6.2.3, hiring of locker does not amount to transfer of right to use; hence should not be taxable under this category. but since the scope has been wider; this point may not be effective enough to non-taxability.

2. service tax can not be demanded on which the point of taxation has been determined to be prior to 01.07.2012. Since, you paid the amount much in advance, the point of taxation was the time of payment and not the provision of service. - as per point no.10.1.7 of the Education Guide issued by CBEC easily downloadable from www.cbec.gov.in under Service tax section.

You should point out the second point to your defence.

Hope your problem gets resolved.