penalty on service tax

[Suprakas Chaudhuri]

Service tax on rent from immovable property

Rule 7C of service tax rule 1994 provides penalty for late submission of return.

Section 80 on the other hand, inserted by Finance Act,2012 provides for non- imposition of penalty  in case of service tax on rent from immovable property provided the taxes due as on 6.3.2012 along with interest are paid within 6 months from the passing of the Finance Bill, 2012 (passed on 28.5.2012).

Since service tax returns could not be filed without payment of taxes, can the penalty for late submission of returns be imposed ? What would be the due dates for filing these returns due from 2007 where service tax is paid within the timeframe of Section 80(2)?

[YAGAY andSUN]

Rule 7C was inserted in the Budget'2011 to discourage the assessee who don't submit their returns within prescribed time limit. Rs. 20000/- is the maximum penalty, has been imposed in this rule, if the returns have been filed after 30 days.

While Section 80(2) was introduced to speed up the service tax amount stucked up in the most disputed taxable service "Renting of Immovable Property".

If any assessee who has taken this facility as mentioned in the Section 80(2) of the Finance Act and paid the overdue amount with interest with in Six Months from the passing of the Finance Bill, 2012, then, no penalty will be leviled.  This non levi of penalty is extended upto the amount of service tax on Renting of Immovable Property which was earlier not being paid by the service providers.

Hence, penalty for non filing of returns will be levied despite of introduction of Section 80(2) in the Budget' 2012.  As even if this renting of immovable property was an disputed taxable service, even then, service providers have to comply with the provision of service tax laws.

Service providers, were required to mention this amount in the service tax return (despite of non payment of service tax) for determining the service tax liablity.

Hence, Department will surely impose the mandatory penalty accordingl the Rule 7C.

[YAGAY andSUN]

Even during the hearing on this matter, the Hon'ble Delhi High Court had ordered that assessees are required to furnish their returns incorporating  the taxable amount on Renting on Immovable Property for determining the tax liability.

AI Summary

Penalty for late returns: exemption for rent-of-immovable-property tax payment doesn't prevent imposition of filing penalties. The statutory late-filing penalty regime remains applicable to returns filed after prescribed deadlines; a payment-based exemption for service tax on renting of immovable property that waives penalty for the underlying tax when outstanding amounts are paid with interest within the cure period does not relieve taxpayers of the separate obligation to file returns on time. Taxpayers had to disclose the taxable rent amount in returns even if unpaid, and the authority may impose the mandatory late-filing penalty despite the payment-related exemption.