Service tax on revenue sharing agreement

Milan Agrawal (Chartered Accountant) (207 Points)

12 November 2012  

Dear All,

 

My client has given a property to a party, having an agreement that every month, that party would pay either Rs. 150000 or 7% of its net sales, whichever is higher.

 

Now, the situation is, it may simply be treated as Rent of Immovable Property on which Service Tax will be liable. However, my client says that it is a not a Rental agreement rather it is a Revenue Sharing Agreement and hence Service Tax will not be liable.

 

Kindly look into the matter & guide.

 

Regards,

CA Milan Agrawal