SERVICE TAX ON CONVERSION PREMIUM

[abbas mukhi]

Dear Sir,

whether Conversion premium received on converting lease hold properties into free hold property is liable for Service Tax??

Thanks

[KASTURI SETHI]

Sir,

No. Conversion of lease hold property into free hold property is not service in terms of Section 65 B(44) of the Finance Act, 1994. It is in the exclusion clause (a) of Section 65 B(44). Hence not liable to Service Tax.

[Ganeshan Kalyani]

I agree with views submitted by Kasturi sir.

[KASTURI SETHI]

In Chandigarh Commissionerate who paid Service Tax on conversion charges for conversion into free hold applied for refund and got sanctioned. I have no proof with me.

[DR.MARIAPPAN GOVINDARAJAN]

Yes the views are correct in my opinion.

[Guest]

Dear Expertise,

Can you please guide me whether iam laible to pay the service tax on ROYALTY ,if iam using the brand name of the USA for which royalty is paid.

[KASTURI SETHI]

Dear Akbar Basha,

With reference to your query dated 18.12.15, you are liable to pay Service Tax under category of "Intellectual Property Services" specified under Section 65(105) (zzr) (Now Other Than Negative List) read with Notification No.30/12-ST dated 20.6.2012 as amended. (Serial No.10) under Reverse Charge Mechanism. 100% liability is on you as Service Receiver, being in taxable taxable territory.

[Guest]

NOTED WITH MANY THANKS SIR.

AI Summary

Conversion premium not a taxable service, so conversion charges excluded from service tax liability under statutory exclusion. Conversion premium for converting leasehold to freehold is not a taxable service and is excluded from service tax liability; one commissionerate reportedly sanctioned a refund for conversion charges. Payments of royalties for use of a foreign brand are taxable as Intellectual Property Services under the Reverse Charge Mechanism, with full liability on the service recipient in the taxable territory.