Interest Free Security Deposit on Rent

[Vivek anandhan]

We have paid Interest free security depost for our rental factory premises.  Our lessor collecting service tax for Monthly Rent. 

 Whether we have to pay service tax for Security deposit also.

Any one can explain me. 

Vivekanandhan

[CA Rachit Agarwal]

If the Security Deposit is non refundable then, Service Tax will be applicable on the same.

However if the Security deposit is refundable then, Service Tax not be applicable on such deposits.

AI Summary

Service tax on security deposits applies when deposits are non refundable, but not when they are refundable.
Service tax applies to interest free security deposits that are non refundable, treating such deposits as taxable receipts, whereas refundable security deposits do not attract service tax; the key determinant is the deposit's refundability and the terms documented between lessor and lessee.