Service tax applicabilty on Subsidy

[Guest]

Hello,

I Have an Issue which is elaborated as follows:-

1.We are running a company which is engage to Common maintenance Services which is rendering to residents of builder.

2.We have raising an invoice to residents for monthly maintenance.

3.However,Few of the residents has not paid their monthly maintenance charges due to Builder has not Fulfill their promises as he said at the time of flat Purchase.

4.In addition to, Most of the flat has Unoccupied in such building.Thus, we have

5.Thus, we have been suffer form heavy losses & unable to pay the remittance of Various Concern vendors.

6.Finally, the concern builder has decided to pay the shortfall amount for remittance to various vendors.

So, My question is that whether service tax is applicable on such payment which is receive from the builder ?

It may seems to be subsidy from builders for running the existing business .

.

[Ganeshan Kalyani]

Sir, whether service tax is paid on the receipts of maintenance money from members of the society. If there any profit element. Thanks.

[KASTURI SETHI]

The querist has mentioned the word, 'subsidy' which is not correct. It is not subsidy. So many issues are involved in his query. The nature of the queries/problem is such that fool-proof reply is possible only after examination of agreement/contract and other linked records. My sincere advice is thatt The querist should contact consultant/advocate/CA in his own interest. Rest decision is his.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Sir, w.r.t. your reply dated 4.8.2016, I intend to add something for the querist and also seek your opinion as per details given below:-

All NGOs, Charitable Trusts, Co-operative Societies and other societies do not service free of cost. They charge some amount from the service receivers on no-profit-loss basis. It is 'consideration' in terms of Explanation (a) to Section 67 of the Finance Act and chargeable to service Tax as ST is levied on the Gross Amount Charged under Section 67 (3) and defined in Explanation (c) to Section 67. ibid.

There is a gulf of difference between Service Tax law/Finance Act and Income Tax Act. These are exempted from Income Tax being registered under Section 12 AA of the Income Tax Act but not exempted from Service Tax until or unless specifically exempted. There are some services which are specifically exempted from ST if provided by those who are registered under Section 12 AA of the I.T.Act but services provided by the querist are not exempted.

In this context, Board's Circular No. 107/1/2009-S.T., dated 28-1-2009 (Para No.2) is still relevant and important.

 

 

[Ganeshan Kalyani]

Sir, I agree with your views in total. Circular referred in your reply clarifies all aspect in relation to taxability on educational service. It clarifies how the tax applicability is considered. Similarly here the querist provides the Service which may be exempt under income tax act but under service they are taxable. Yes there involves profit element as they are company carrying out such activity for commercial purpose. Thanks.

[KASTURI SETHI]

Sir,

In the eyes of Service Tax law, "Charitable" means nothing should be charged except where specific exemption has been granted to those who registered under Section 12 AA of I.T. act.

AI Summary

Service tax applicability: builder payments covering maintenance shortfalls constitute taxable consideration unless expressly exempted. Payments by the builder to make up maintenance shortfalls are treated as consideration for services and are taxable on the gross amount charged unless a specific service tax exemption applies; income tax exemptions do not automatically exempt such receipts from service tax and factual review of contracts and records is required.