Serrvice Tax.

[Asked by Guest]

I have got my Service Tax Regn.for Rentals on Commercial Propery in August 16.Can I claim deduction for Property Tax()Hopuse Tax to Muncipal Body) in June16 while computing the tax payment for thios tax..Broker for arranging the Tenant has also given a Bill with Service Tax Charged,Is it modvateable.Regards.

[KASTURI SETHI]

Sh.Chaudhary Ji,

Taxes, cesses and duties are not consideration for any particular service as such. You can claim deduction from taxable value only if you pay Service Tax. Without payment of ST, deduction from which taxable value ? Or do you want to pay ST for June, 16 now ? Regarding admissibility of input service credit on the broker's commission, can you prove nexus between input service and output service ?

[Ganeshan Kalyani]

Sir, the extract for service tax guide is reproduced below for understanding:

Inclusion / Exclusion from value of certain expenditure or costs

Where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs shall be treated as consideration for the taxable service provided or to be provided and shall be included in the value for the purpose of charging service tax on the said service.

Sir, in view of above , in my view deduction is not allowed. Thanks .

[Rajagopalan Ranganathan]

Sir,

Regarding deduction of property tax paid for calculating service tax payable on rent collected for renting out immovable property you may please refer to Notification No. 29/2012-ST dated 20.6.2012 (w.e.f. 1.7.2012). Regarding credit of service tax paid by broker for arranging tenet, you have to establish that service of broker is necessary to find a prospective tenant or without broker it is not possible to find a tenant. Otherwise the Department may argue that service of broker is not an input service in respect of renting of immovable property. Prima facie i am of the opinion that you are eligible to avail the credit.

[YAGAY and SUN]

Dear Manjit,

If you are paying service tax from the month of June'16 also then you can claim the deduction of property tax proportionately.

If property tax is 12000/- then, from taxable amount you may deduct ₹ 3000/- for the month of June - August 2016.

For availment of CENVAT credit you would have to show the nexus between the input services and output service so provided by you as rightly conveyed by Rajagopalan Ranganathan Sir.

Regards

YAGAY and SUN

[CSSANJAY MALHOTRA]

Dear Mr. Manjit,

Yes, the deduction of property tax for the respective period is allowed for the purpose of calculation of Service tax. Experts have already validated the same.

AI Summary

Property tax deductibility: deduction permitted when service tax is paid; broker service credit requires proven nexus.
Property tax paid may be deducted from the taxable value of renting immovable property only where service tax on the renting service is paid; Notification No. 29/2012-ST permits such deduction and it should be applied proportionately for relevant months. Input tax credit on broker commission is available only if a factual nexus is shown between the broker's service and the output renting service, establishing that the broker's service is necessary or related to provision of the taxable service.