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Service Tax on rent

CA Vishvesh (Chartered Accountant) (187 Points)

29 June 2009

As per Delhi High Court judgement in Home Solution Retail (India) Ltd vs. UOI renting of immoveable property for use of business/commerce would not by itself constitute a taxable service and hence not subjected to Service Tax u/s 65 of the Act.

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8 Replies

Finance83 (Finance exec) (22 Points)
Replied 31 August 2009

Hi,

I would like to know is Cess @ 3% component on Stax amt excluded under new law ..

Regards

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EKALABYA TALUKDAR (SERVICE TAX CONSULTANT) (666 Points)
Replied 31 August 2009

Originally posted by :CA Vishvesh
"	As per Delhi High Court judgement in Home Solution Retail (India) Ltd vs. UOI renting of immoveable property for use of business/commerce would not by itself constitute a taxable service and hence not subjected to Service Tax u/s 65 of the Act.	"

Delhi High Court and many other High Courts gave the judgements alike. But SERVICE TAX AUTHORITY may move the case to SUPREME COURT . And if the Suprime Courts decesion is the same as other High Courts, only then you will be released from paying the SERVICE TAX on "Rent on Immovable property". Oherwise you have to give a declaration, that you are not paying the SERVICE TAX on the RENT for the above mentioned reason. If the Supreme Courts decesion comes in favour of you PAY NOTHING, If not you will pay all the pending SERVICE TAX on Rent to ST Authority.

priti (artist) (49 Points)
Replied 02 September 2009

Sir, Please advice.

My Mother has 2 reputable companies as her tenants in her commercial building. She gets a rent of Rs. 1 lac (66,000 + 34,000) per month. For the year 2007-08, she has taken the 8 lacs exemption and collected Service Tax ( @ 12% + 2% cess + 1% sec cess) for Jan, Feb, March.

For 2008-09, she was unaware that she cannot take 8 lac exemption? So she has collected the same amount. Meanwhile one of the tenant has made her sign a paper saying that he wont be liable for any further taxes if not collected for that year.

Please let me know how much has to be collected every month? are there any exemptions. For 2008-09 do we collect service tax from April 08? If so until when?
Thanks in advance. priti

priti (artist) (49 Points)
Replied 02 September 2009

Also would you let me know if our computation is correct? Thanks

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EKALABYA TALUKDAR (SERVICE TAX CONSULTANT) (666 Points)
Replied 02 September 2009

Originally posted by :priti
"	Sir, Please advice. My Mother has 2 reputable companies as her tenants in her commercial building. She gets a rent of Rs. 1 lac (66,000 + 34,000) per month. For the year 2007-08, she has taken the 8 lacs exemption and collected Service Tax ( @ 12% + 2% cess + 1% sec cess) for Jan, Feb, March. For 2008-09, she was unaware that she cannot take 8 lac exemption? So she has collected the same amount. Meanwhile one of the tenant has made her sign a paper saying that he wont be liable for any further taxes if not collected for that year. Please let me know how much has to be collected every month? are there any exemptions. For 2008-09 do we collect service tax from April 08? If so until when? Thanks in advance. priti	"

Rs EIGHT LAKH limit has been changed from 1^st March 2008. by Notification no 8/2008. Now the limit is Rs TEN LAKH. But one thing you should be clear, if you collect SERVICE TAX you are liable to pay the same to SERVICE TAX AUTHORITY.

Tenant v/s your relation is within your preview I have nothing to comment

Don’t think you will collect the money and take it in your credit as you are within the limit of Eight lakh or Ten lakh

Computation will be as such :Upto 23rd February 2009 @ 12.36%. On or after 24^th February 2009 @ 10.30% on RENT

priti (artist) (49 Points)
Replied 02 September 2009

Perhaps I wasnt clear enough. We have already paid CBEC Rs. 37,000 (2007-08) and Rs. 30, 900 (2008-09). My question was can we still get 10 lac exemption for the second year (2008-09)? Would you pls let me know the computation for a rent of 1 lac per month? Exactly how many months do we need to collect? Thank you

Satish (CA Final Student) (479 Points)
Replied 02 September 2009

Dear Priti,

You cannot avail exemption of 10 lakh in the year 2008-09 as the condition precedent to this is your previous years gross receipts should not have been exceeded Rs 10 Lakh. As you wrote, during 07-08, your mother got Rs. 1 Lakh per month rent for 11 months. your Mother was liable to pay service tax right from the rupee one for the Financial year 2008-09. So the service tax payable for the financial year 2008-09 would be as follows -

For the period from 1st April 08 to 24th Feb 09 - at the rate of 12.36%

after 24th February to 31st March - 10.3%

For february, you need to bifurcate the rent in two parts as mentioned above.

If your Mother has not paid the service tax for the whole year 08-09, She needs to pay interest also @ 13 % p.a. Apart from this, penalty may be imposed by the department by issueing a Show Cause Notice.

If you have any doubt , you can futher ask your query.