service tax paid on value after abatement

[S.C. WADHWA]

Dear Experts,
Dear Experts, We are issuing invoice on tenant for Rs. One lac per month with break up as under:-
Rent amount ₹ 89000/- Plus service tax @12.36% ₹ 11000/-. But we are depositing
service tax of ₹ 10780/- after getting abatement of house tax paid ₹ 2000/- per month,
And by the end of the year we booked misc income ₹ 2640/-. Diff of service tax claimed
and paid.
Now my query is whether this procedure is OK or not. Please give your expert opinion. Regards, WADHWA

[KASTURI SETHI]

Your procedure is correct. Deduction on account of property tax is allowed under Notification No. 29/2012-S.T., dated 20-6-2012.Earlier it was allowed under Notification No.24/2007-ST dated 22.5.2007 (Now rescinded).

[S.C. WADHWA]

Dear Expert, Thanks a lot for your reply.
If my procedure is correct then give further reply about the followings:-
A. Bills issued to tenant for showing rent ₹ 89000/- and Service tax ₹ 11000/-.
B. Amount booked in our books accordingly Rent ₹ 89000/- and S.T. ₹ 11000/-
C. S.T paid after getting abatement ₹ 10780/- and booked accordingly in books.
D. Difference in service tax payable is ₹ 220/- per Month.
E. Total diff. in year is ₹ 2640/- showing service tax payable in books.
F. Where I should book this amount of diff. either in Misc Income or rental Income.
G.Tenant will get cenvat for ₹ 11000/- where as we are paying Service tax ₹ 10780/-.
H:- Bills issued to tenant as mentioned at point no.A above or according to the reply
earlier received for showing gross rent ₹ 89220/- and Service tax ₹ 10780/-.
REGARDS,
WADHWA

[KASTURI SETHI]

Wadhwa Ji,

There must not be any difference between Service Tax charged from service receiver and ST deposited with Central Govt. You cannot keep any amount of Service Tax with you. If u r charging ₹ 100,000/- which is inclusive of ST of Rs.ST of ₹ 11,000/- you will have to deposit the same amount with Govt. Then no deduction. You will have to change your billing system. I have no commerce background. Regarding accounting system you will have to consult C.A.

₹ 2000/- of house tax is deduction from gross receipt and not abatement. Benefit of deduction should also go to the consumer otherwise House Tax is your responsibility.

Bill should be like this Gross receipt ₹ 1,00,00/-

House Tax 2,000/-

Cum Tax Value 98000/-

Rent 87220/-

ST 10780/- If u do not like this billing system u will have to consult CA otherwise no relaxation from ₹ 11000/-

[KASTURI SETHI]

With new rate of ST @14%, Bill should be raised in this way:-

Gross Rent 1,00,000/- A

Deduction on account of property tax: 2000/- B

Cum Tax Value 98,000/- (A-B)

Net Taxable Value 85965/- C

ST @14% 12035/- D

E- 98000/- =(C+D)

AI Summary

Service tax on rent: property tax deduction permitted but supplier must adjust billing and remit correct tax.
Deduction for property tax from gross receipts is permitted under Notification No.29/2012-S.T. when determining the taxable value of rent for service tax; billing must reflect gross receipt, property tax deduction and the net taxable value, the supplier must remit the full tax liability and may not retain any difference between tax charged and tax deposited, and the service recipient may claim input credit on the service tax as charged.