Delhi High Court on Friday ruled that renting of immovable property for commercial purposes are liable to levy of service tax.
The court overruled the 2009 order of the court that concluded that renting of immovable property for use in the course of furtherance of business and commerce by itself did’t entail any value addition and therefore could not be regarded as a service.
The effect of recent judgment is that the owners of the commercial properties who let out their properties to the tenants are now liable to charge service tax on the gross rent received and deposit the same with the revenue department.
The levy has been given the retrospective effect from June 1, 2007, which means that those who were not charging the service tax from the tenants would have to pay the same starting from June 2007 till today. Such retrospective effect may also result in imposition of penalties and interest by the revenue department for late deposit of the tax amount.
