Service Tax on lease rent

[Sucheta Agrawal]

Case A LTd engaged in real estate business.The company puchased land on lease from Local authority on 99 years lease. The company is developing flats on the said land and sold these flats in open market at following structure Basic Cost price 2400 sq. ft Plc as applicable lease rent 85 sq.ft. IFMS 20 Sq. ft. conditions: 1. Total lease payable to the local authority is 12 cr. and the total amount to be collected from buyer of the flat is also same. 2. Total lease payable to the local authority is 12 cr and the total amount to be collected from buyer of the flat is Rs 13.5 cr 3. Total lease payable to the local authority is 12 cr and the total amount to be collected from buyer of the flat is Rs 10.5 cr Questions 1. Whether lease rent paid to the local authrity taxable under serive tax. ( if yes than under what ground) 2. If yes, how does the service tax treatment differ in above three conditions.

AI Summary

Real estate lease subject to service tax under Finance Act 2010; local authority to remit tax on renting land. A real estate company, A Ltd, leased land from a local authority for 99 years to develop and sell flats. The lease rent is set at 85 per sq. ft., with the total lease payable to the local authority being 12 crore. The discussion addresses whether this lease rent is subject to service tax. According to an amendment in the Finance Act 2010, leasing vacant land for business purposes, such as constructing flats, is taxable under 'Renting of immovable property service.' Therefore, the local authority must collect and remit service tax, which remains unchanged across different pricing scenarios for the flats.