service tax on rent (lease rent)

[ASHOK VIJAY]

We had given commercial properties on lease.The tenant are not paying service tax refering the decision of Delhi High Court. Please let me know what about Service tax deposit liability on our part. How the rent received on such commercial properties to be shown in Return ST-3  Early reply will be awaited Ashok Vijay

[Brijesh Verma]

Dear Mr. Vijay, as far as the matter of High Court decision is concerned, the same has already been set aside by the amendments proposed to be made by Finance Bill 2010. Now, the lawmakers have specifically expressed that mere renting is a service in itself. So confusion regarding taxability is now no more persistent. However, since the amendment would be considered as carrying a Charging effect, so its retrospective applicability might be an issue in question. Keen look would also be given to section 76 of the Finance Bill 2010 which is "Validating Provision" which says that all previous demand would be collected along with interest and penalty. Overall, the liability for paying tax on rental Income has been confirmed, but a wait and watch situation remains untill the bill attains finality.

[DEV KUMAR KOTHARI]

The tenants who are eligible to avail CENVAT have no problem in paying ST, however, other tenatns are not willing to pay. The owners association should make representation to the Finance Minister to provide for rverse charge method- to make tenants liable to pay servie availed. This will benefit revenue also because in that case most of big entitiels taking commercial properties on rent will be liable to pay ST. Whereas in case of landlord liability, many landlords get exemption due to threshhold limit. The following article on this website may be referred to: Budget suggestion: Reverse charge method for tax on rent if the levy persist. CA Mrs. Uma Kothari

AI Summary

Service tax on rent: renting of commercial property treated as taxable service, with validating provision affecting past demands. The amendment treats renting of commercial property as a taxable service and includes a validating provision to collect past demands with interest and penalty, creating retrospective charging concerns until the legislation attains finality. Tenants with CENVAT eligibility will generally pay, others resist; a reverse charge mechanism is proposed to shift liability to tenants and mitigate landlord threshold exemptions while ST-3 reporting awaits administrative guidance.