Clarification on the category - renting of immovable property

[vinod bansal]

Respected Sir, I would like to draw your attention towards the most criticized service tax amendment regarding applicability of service tax on renting. In my view, the provision is wrongly interpreted as being applicable on rent, because if we have a close look at the charging section, it reads as "Service provided in relation to renting of immovable property......" It means that the charge is not on rent but on the services provided so as to get the property rented. The clause, in my view, shall be covering the property agents/brokers who charge 2 or 3 months' rent as their service charges to help a person get the property or the tenant. I would like to get your expert view on the matter. With thanks, CA. Nitin Kumar Agarwal 09837493334 forwarded to all the readers by rajan gupta

As you mentioned in your query that only services provided 'in relation'to renting of immovable property are chargable to Service Tax. If you see newly added sec. 65(105)(zzzz), the spirit of law is to tax the rent also. If you see the main issue on chargability of rent is " Is it Service." It is an issue of constitutional litigation which can be challanged to Judicial Authority. Service means if you do something whether physically or mentally for another person in consideration of money.Renting is sale of right to use the property in consideration of money. So in my view it is not covered under criteria of service.

I AGREE. THE CHARGE IS ON SERVICE PROVIDED IN RELATION TO RENTING OF IMMOVABLE PROPERTY.

Now Mr. FM and his advisor Mr. Parthasarathi Shome has also clarified the issue that they are intend to tax the renting. Services in relation to renting of immovable property is written in Memorandum of Budget 2007. But in Finance Bill 2007 only renting of immovable property is given. (page 109) So Service Tax shall be charged on rent also. Thanks Anurag Bansal

AI Summary

Service tax on renting of immovable property may extend to rent and intermediary facilitation services under amended charging language.
Applicability of service tax to transactions described as "services provided in relation to renting of immovable property" is contested: one interpretation confines the charge to intermediary services by agents and brokers who procure tenants or properties, while another, supported by budgetary statements and amended charging language, indicates legislative intent to extend the service tax charge to the rent payable for use of immovable property, raising a statutory and constitutional question on whether renting constitutes a taxable service.