Payment of Service Tax on rent recovery.

[Ashwin Garg]

Sir,

We are a manufacturer located in remote village and besides factory, residential colony is situated. All quaters, shops, offices, halls are constructed by company. We are recovering nominal rent as detailed below and it is shown as miscellaneous income in P and L :

a) Employees Quaters : Say ₹ 100 per month from salary

b) Workers Quaters : Say ₹ 50 per month from salary

c) Shops : Say Rs 1,100 per month

d) Mobile Tower rent towards open space : Say Rs 4,000 per month

e) Banks and ATM : Say ₹ 2,000 per month

f) Transporter Office : Say ₹ 1,000 per month

g) Community Hall towards facilities provided like light, cleaning charges.

Besides above we are also recovering electricity charges from above users which is supplied from our captive power plant and understand that no service tax is payable since electricity is 'goods' and the charges are shown as miscellaneous income in P and L.

Querry :

a) on which of above activity we need to pay service tax

b) under which head we need to pay service tax

c) whether we need to pay service tax on electricity charges recovered

thanks in advance

ashwin

[YAGAY andSUN]

Dear Ashwin,

Except on activity no. a and b, you are under statutory obligation to charge service tax. Under Renting of immovable property you would charge service tax. Yes, you need to pay service tax on electricity generated via your captive power plant.

Regards

NeelamTaneja,(Executive Consultant)

YAGAY and SUN,

(Management, Business, and Indirect Tax Consultants)

[PAWAN KUMAR]

Dear Sir,

As per my view, no need to pay service tax on any activity.

The employees and others for which you are providing accommodation including electricity and other facilities and deducting an notional amount, The same is not in the nature of consideration under commercial activity, hence not liable for service tax.

AI Summary

Service tax liability on renting of immovable property and captive electricity charges depends on whether recoveries constitute commercial consideration. Company recovers nominal payments for company provided residential and workers' quarters, shops, open space for telecom infrastructure, bank/ATM and transporter premises, a community hall, and electricity supplied from a captive power plant. Inquiry asks whether these receipts attract service tax and under what head. One opinion treats non employee lets as taxable under Renting of Immovable Property and captive electricity charges as taxable; the other contends such nominal recoveries are not commercial consideration and thus not taxable.