We are providing rent service, Service tax audit conducted in our premises, They have raised audit point as below.
Audit Point - Valuation of service income - Suppression of Taxable Value of Service by not including the Value of Deposit received.
As per the above point they are asking service tax on Returnable security depoist amount received rom Lessee.
Whether we need to pay service tax as per the point, any case in law is there related to the above issue.
Regards
Vivekanandhan
Debate on Service Tax Applicability to Returnable Security Deposits in Service Tax Audit; Section Involvement Discussed A discussion on whether service tax should be applied to returnable security deposits received from lessees during a service tax audit. The audit raised concerns about the valuation of service income, suggesting that the security deposit should be included in the taxable value. Respondents argue that service tax is not applicable to refundable deposits, as they are not part of the rental service income. It is noted that if the deposit compensates for reduced rent, service tax might be applicable on the adjusted amount. However, the consensus is that the Revenue Department cannot demand service tax on returnable deposits unless used to settle outstanding rent. (AI Summary)
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