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VISHAL BHASIN (Director)     10 March 2011

Service Tax on Rental

I wish to lease a commercial property for Rs 150000 per month, is there a way of avoiding Service Tax, the building has a 82KW Genset, 4 Floors with Electrical Fittings/ Office Furniture etc,tx



Learning

 12 Replies

Jerry Lopez (Lawyer)     11 March 2011

 

Dear Vishal,

Under Section 65(90a) the renting of immovble property is a taxable service. Hence, you being the service provider are liable pay the Service Tax on the same.  

However, i do not understand why you would want to avoid it as the service tax can always be validly charged upon the service recipient and same can be deposited by you with the Revenue, but the same has to be expressedly mentioned in the lease deed. A recipient is not liable to bear service tax, unless he agrees to do so contractually, or it is specifically provided under the Service Tax Rules. Hence, only an expressed contract can save you form bearing the costs of Service Tax liability. 

However, there is no way that you can escape the tax liability unless the service thus rendered are being rendered to educational institute which i suppose is not the case....

 

However, i wish to submit that as per the judgement of Hon'ble High Court of Delhi, the mere act of conveyance of the immovable property does not amount to rendering service, there must be something extra of the nature of servitude that qualifies it as a service. But the same has been challenged by the Revenue before the Hon'ble Supreme Court and is pending adjudication.....

 

Though the hopes of us taxation lawyers are high but still for the time being i shall advise that you keep yourself prepared to pay the tax......

Mohd Shakeel (Accounts Officer)     12 March 2011

What are current percentages of income tax ?

~~~~~Rahim (Entrepreneur)     13 March 2011

Mine is the same case but its a 3 room flat, which i am proposing to lease out @15000 pm for 10 motnhs. So what is rate of Service Tax and would be getting rent by cash?

Jerry Lopez (Lawyer)     14 March 2011

Dear Rahim,

Rs.15000*12= Rs.180000/- only. This means you are exempted from payment of Service Tax.... So just relax...

~~~~~Rahim (Entrepreneur)     14 March 2011

^Thanks. What is the upper limit of this kind of exemption? What if i lease 2 units ? Will the exemtion still persist?

Jerry Lopez (Lawyer)     14 March 2011

Rahim....

You don't need to do anything till your value of services remains below Rs. 9,00,000/- per annum; anything above and after that; you can contact me.....

Bye

~~~~~Rahim (Entrepreneur)     15 March 2011

Thank you sir :)

Hetalkumar (Asst. Vice President (Legal))     20 February 2012

Dear Sir,

Please let me aware myself as to applicability of service tax on the side of Service Provider or with acquirer, statutorily ? Please guide as to whether this is applicable to the service provider or acquirer as per Act / Statute, if the income goes to over and above limit of Rs. 10-lacs per annum ?

Please Guide in line of any judgement  / verdict by appex court.

Regards,

Hetalkumar Hindocha

Vineet (Director)     20 February 2012

Service tax is levied on service provider who invariably passes it on the service recipient as in case of VAT.

 

Service providers having gross receipts from services upto Rs 10 Lakh per annum are exempt. But if receipts are more than that amount, ST leviable on the whole amount .

 

Service tax on rental of immovable properties for commercial purposes is more or less settled with all high courts Bombay, Delhi, Assam, Gujrat, Punjab & Haryana upholding the same. Still some hopefuls are contesting it before Supreme Court where Honble court has also refused to grant any stay on levy wef 1-10-2011 onwards.

narendra.s.p (Chief Manager(Law))     22 February 2012

Service Tax is for renting of commercial prmises and is not applicable for letting out for residential purpose

Vineet (Director)     22 February 2012

Good observation Mr Narendra. Only problem is law does not recognise residentail or commercial property. It only talks about "Renting of immpovable property for use in the course of furtherance of business or commerce"

 

So even if you rent out a residential property to a concern which utilises it in furtherance of business or commerce (as office, guest house, store etc), it will still attract service tax.

Ajit (Dean)     10 October 2014

Can I avoid paying service tax on rent income, if I rent part of the building to my wife, who in turn sub leases or rents out that part also to the same party to whom I have rented the otjher portion of the building. That way can we split the rental income to make it below 10 lakhs per year for each of us?

Please clarify. For income tax purposes, I shall show the total rent income in my name.

Ajit


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