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Service tax on rent

Geetha (Aricle) (103 Points)

21 December 2012

My client is paying 1,30,000 rent every month.. what is the service tax and tdscharged on it?? is there any limit to charge servie tax on rent??? plz give the jounal entry for 1,30,000 rent

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10 Replies

Sumit Grover (Chartered Accountant ) (3652 Points)
Replied 21 December 2012

Provisions:

If the value of services(i.e. rent in this case), doesnt exceed Rs. 10,00,000 during the preceeding financial year, then no service tax is applicable in the current year till value of services upto Rs. 10,00,000 of the current year.

And the service tax is chargeable @ 12.36%.

Further, TDS is chargeable @ 10% --in case of rent of land/building, furniture & fixture

@ 2%- in case of Plant / machinery

In case of rent, TDS is deducted on amount exclusive of service tax.

Journal entry(assuming service tax is chargeable in this case based on above provisions):

Further, it is assumed that it was the rent of Building and it was exclusive of service tax:

Rent A/c Dr. 1,30,000

Service tax expense A/c( @ 12.36%) Dr. 16,068

To Party A/c 1,33,068

To TDS Payable 13,000

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Geetha (Aricle) (103 Points)
Replied 21 December 2012

Thank u so much sir.......:)

Manoj Agarwal (Service Tax Consultant Rourkela ServiceTaxExpert@yahoo.com) (3456 Points)
Replied 30 December 2012

Agree with sumit. However, the exemption of Rs. 10 Lacs is for aggregate value of all the taxable service from all the premisis and not for each taxable service.

For JV, it's always better to route TDS through Party Ledger A/c:

Rent A/c Dr. 1,30,000

Service tax expense A/c( @ 12.36%) Dr. 16,068

To Party A/c Cr. 1,46,068

Party A/c Dr. 13,000

To TDS Payable Cr. 13,000

Priyanka Maheshwari (Assistant Manager) (76 Points)
Replied 31 December 2012

Agreed with Mr. Manoj

1 Like

Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3469 Points)
Replied 31 December 2012

Sumit & Manoj

I wish to know why you are treating the service tax as an expense. Will it not be debited to Input Service Tax (Receivable) as cenvat credit is available on this assuming this is used to provide taxable output services.

Request your valued thoughts.

Regards,

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Sumit Grover (Chartered Accountant ) (3652 Points)
Replied 31 December 2012

In this question, it hasn't been mentioned whether the assessee is service provider or not....it might be possible that hez carryin on business trading in goods or any other business not involving output service.

In case the assessee is carrying on business of providing of output service, then it shall be debited to CENVAT Receivable A/c.

but in rply above, it has been assumed that there is no output service.

Manoj Agarwal (Service Tax Consultant Rourkela ServiceTaxExpert@yahoo.com) (3456 Points)
Replied 31 December 2012

Dipjyoti,

Since Sumit has already replied, I need not repeat. Infact, you yourself have assumed stating "assuming this is used to provide taxable output services." while we assumed otherwise. I also agree to your view.

Actually few of my clients who are paying Rent are Shopkeepers & Retailers and are not service providers. I had there situation in mind while replying to the above...