CAN CREDIT BE CLAIMED ON SERVICE TAX PAID ON OFFICE RENT?

[Asked by Guest]

CAN A COMPANY CLAIM CREDIT OF SERVICE TAX PAID ON OFFICE RENT (PAID BY COMPANY TO ITS DIRECTORS) ?

DOES THE RENT PAID ON IMMOVABLE PROPERTY COVERED UNDER REVERSE CHARGES MECHANISM?

WHAT IF SERVICES RENDERED BY DIRECTORS IS BELOW EXEMPTION LIMIT, CAN COMPANY BE LIABLE TO PAY SERVICE TAX ON OFFICE RENT PAID.

[Ganeshan Kalyani]

Reply to 1) yes credit can be taken by way of ISD mechanism .

2) No, renting of immovable property service is not covered under reverse charge mechanism .

3) No, if the value of service provided is below the threshold limit then there is no need to get registration for the service provider. Further, company is not liable to pay service tax if the service is not covered under reverse charge.

Thanks a lot shri Ganeshan Ji & Shri Mariappan Ji

Sirs, at the of excise audit, excise officers raised a demand on point no.3. the company has paid office rent to its directors. the total amount of rent below the thereshold limit.

Sir, our company has not pay service tax as the service is not covered under reverse charge. now what should we do now.

please advice with relevant case laws.

[DR.MARIAPPAN GOVINDARAJAN]

What is the ground put forth by the department in this case?

the ground taken by department is as follows:-

" Non payment of service tax under reverse charge on rent paid against renting of immovable property service received from directors"

[DR.MARIAPPAN GOVINDARAJAN]

In respect of services provided or agreed to be provided by a director of a company or a body corporate to the said company or the body corporate - service tax is payable under reverse charge mechanism for which no threshold limit is available. If the contract made by the company with its directors for the payment of fees or other amount includes paying rent to the office of its director, then it is liable to pay under reverse charge mechanism. This may be claimed in CENVAT credit as input services.

Sir,

the contract is entered by company and director's individual capacity. the agreement was made with a person (who is also a director) and with company, will RCM apply in this situatation also.

AI Summary

Reverse charge on rent may apply where a director supplies office premises, obligating the company to pay and claim credit.
Where a director supplies renting of immovable property to the company, the recipient company is liable to pay service tax under the reverse charge mechanism with no threshold exemption; the tax so paid may be claimed as CENVAT credit or handled through the Input Service Distributor mechanism. Contractual form - a contract with the director in his individual capacity supplying rent to the company - falls within reverse charge scope, and a provider's lack of registration or sub-threshold value does not negate the recipient's reverse charge obligation if statutorily imposed.