Service tax payment on property tax or not.

[chaganti srinivas]

Dear Sir, we have one issue i.e. we paid service tax on rent after deduction of property tax, but Service Tax Superindent is not accepting that he is saying service tax payable should be on gross amount only, but we saw one Notification no. 24/2007 Service tax as per this service tax applicable is only net amount (after deduction of Property tax).if this notification is amended pls. give amended notification No. please give your valueable sugestion and case laws on this issue. BENARJEE. GOVADA

[Rama Krishana]

Notification no. 24/2007 dated 22-5-2007 is still valid you have rightly claimed the benefit of this notification. Show the copy of this notification to the concerned officer, he should appreciate the same.

[DEV KUMAR KOTHARI]

I hope by property tax you mean local tax on property like municipal tax. Municipal tax is to be deducted from the rent as rightly stated by Shri Rama Krishna.

You can also place argument that to the extent of  municipal  tax paid/ payable , the  value of service ( if at all renting  is considered a service) rendered is  reduced because , municipal tax is in fact , in nature of a fees for services rendered by municipality  in  the locality where property is situate and such services are essential services.  Another aspect is that if MT is paid by tenant to the municipality, then also it will not come into value of service rendered by landlord, (if at all renting  be a service). Thus to the extent of municipal tax payable, the landlords do not receive any value of service provided by renting of property, if at all it be a taxable service.

AI Summary

Service tax valuation on rent: municipal/property tax deductible from rent, reducing taxable value under applicable notification. Service tax on rent is to be assessed after permitting deduction for municipal or property tax under the applicable valuation notification. Municipal/property tax operates as a fee for local services and, whether paid by landlord or tenant, does not constitute value received by the landlord and therefore should be excluded from the taxable value of rent for service tax purposes.