service tax on rent

[pradip patwardhan]

Dear All,

If one partnership firm, given cold storage on rent to one Pvt ltd Company. The said company pays actual Electricity bill, water bill etc. of cold storage, directly to MSEB and Municipality respectively as per written agreement and pay only rent amount to Partnership firm(service provider)for using Cold storage as fixed by agreement. (Amount of rent is more than 10 Lakhs in F.Y.) I want to know, Is only rent amount is taxable under service tax or amount paid to MSEB & water bill is also taxable or not??Kindly clarify… 

Regards

pradip..

 

[Rajesh Sharma]

No that amount is not taxable, only amount received by you i.e. rent from the client is taxable. and service tax will be paid on that amount only.

[manju nath]

Dear Mr.Praddip,

Only rent amount is taxable under service tax and MSEB AND WATER BILL is nontaxable. Even if you pay  out of your pocket MSEB AND WATER BIL  that will be non taxable since reimbursable expenses are not taxable under Rule 5(2) of Service Tax (determination of Value)

 

[pradip patwardhan]

Thank You very much to both of you.

[pradip patwardhan]

Dear All,

I want to know if building given on rent including electricity and water charges and received amount from service receiver including rent + electricity+water charges. then which amount is taxable for service tax only rent amount or total amount including expense kindly reply..

[MUKUND THAKKAR]

Dear,

if your rent aggrement is mention  that  Electricity and water charges in scope of  owner, In such case  you  have  to pay the service tax on  rent amount+Electricity+water charges. because lumpsum amount  is  including in rent and not  possible  to  justify the amount  how much amount  will go for MSEB and how much go for  water charges.?

so as per my view please  refer the  rent aggrement word  to word and follow the same.

[Brijesh Verma]

Dear Pradip Ji

Have you checked if the cold storage satisfies the conditions mentioned u/s 66D(d) ???

[Mukesh Shah]

ONLY RENT IS LIABLE TO SERVICE TAX & NOT MSEB BILL OR ANY OTHER EXPENSE BORNE BY THE LICENCEE

[pradip patwardhan]

Dear Brijesh Sir

Thank You for your participation.

I am to inform you that cold storage is using for storage of goods other than agriculture produce hence benefit is not available. Hence I want to ask that if service receiver paying only rent amount to service provider (Cold storage owner) and paying directly the electricity bill and water bill to respective authority and not to service provider of cold storage (Ele bill & water bill are on the name of service provider ) In this case which amount is taxable under service tax for service provider (cold storage owner)?? Kindly reply.. Thank You.

Regds,

Pradip

 

[Brijesh Verma]

Dear Pradip

In such a situation section 67 of FA94 is the best enactment to judge. 

According to it.. only the gross amount of consideration is taxable. In your situation..the gross amount is only the rent as all other bills are being paid directly at actuals. 

 

[pradip patwardhan]

Dear Brijesh Sir,

Thank You so much for your advice.

Regds,

Pradip

 

[Guest]

If entire cost storage is given on rent and is being used by the client and is paying rent to the landlord and water and electricity charges are paid by him directly then Service Tax would be payable on actual rent amount received.

But, if it is not the case, then, it is pertinent to note that without electricity / water cold storage facility can not be operated so electricity / water is essential element of cold storage service as such service tax would be applicable on electicity and water based on the gross amount received for the service.

In this case splitting appears to be for saving or avoiding Service Tax where the receiver is not availing CREDIT.

 

AI Summary

Service tax on rented facilities: reimbursements paid directly for utilities excluded, bundled payments form taxable consideration. Where a facility is let and utilities are paid directly by the user under a written agreement, only the rent actually received by the owner is taxable; if the agreement bundles rent and utilities into a single payment to the owner, the gross amount is taxable because apportionment is not feasible. Determination of Value principles exclude bona fide reimbursable expenses, but the characterization of the agreement and the essentiality of utilities to the service affect tax treatment.