Service tax on rented commercial premises

[Jignesh Shah]

Is Servict Tax to be collected and paid on rented commercial premises as of now? There still seems to be some confusion in tax-payers' mind. Please give clarity.

[MOHAN S]

As the Supreme Court has refused to grant Stay of the Delhi High Court Judgment which has quashed the levy of Service tax on Renting of Commercial Property, the tax payer is not liable to be charged the service tax. Recently the Delhi High Court has considered this issue and Hon.HC has categorically held that no coercive steps should be taken and no letters demanding Service tax on Renting of Immovable property be issued by the Department as no stay has been granted on this issue by the Hon.SC. The learned Additional Solicitor General appearing for the Baord, assured the Court that corrective steps shall be taken by issuing further instructions, in supersession of earlier instructions, to the officers not to write such letters demanding the payment of service tax or threatening coercive steps.

[RAJESH MANGAL AGRAWAL]

In the Budget 2010,this aspect was taken care of and renting it self is proposed to be a taxable service retrospectively w.e.f.01.06.2007. However in my opinion this aspect is taxable only after the assent of the Finance Bill.

[Rama Krishana]

Yes, since the amendment is retrospective, you should start paying service tax as soon as possible. However, an optimistic assessee may wait for rollback by the Finance Minister, but keeping in view the political issues raised and answered by the government, I am of the view that there would not be any roll back. Therefore, you should start payment service tax on renting of immovable property. Simultaneously you may keep into the mind the normal period of limitation of one year since no demand beyond the normal period of limitation of one year can sustain since the intention of legislature was not clear as admitted by the legislature while making the retrospective amendment.

[Anish Jain]

wait till finance bill is converted into act.

AI Summary

Service tax on renting of commercial property: proposed retrospective levy pending enactment; taxpayers advised to await legislative assent. The Delhi High Court had quashed service tax on renting of commercial property and the Supreme Court refused stay, leading the Board to instruct officers not to issue demand or coercive notices; a Budget proposal would make renting taxable retrospectively but commentators advise that the levy is operative only after the Finance Bill is enacted, creating divergence between immediate compliance and awaiting legislative assent, with limitation-period considerations and forthcoming departmental instructions affecting taxpayer risk.