Service tax applicability on Building insurance and ground rent

[Asked by Guest]

Dear Sir, My company is dealing in Real estate and Renting ( commercial) . We are charging following from customers:- 1. General Maintenance charges 2. Sinking Fund Charges 3. Building Insuarance charges 4. Rent 5. Ground Rent charges 6. Electricity / Water Charges 7. Parking Charges we are charging service tax on all items except " Electricity / Water Charges" Some customer arguing that we should not charge service tax on 1. Building Insurance and Ground rent on the basis that company`s role is only like an agent to collect ground rent and pay it to DDA or other authority , similarly in the case of Insurance ... we should not charge on the ground that it will be charged twice. Your Views are solicited. Thanks Manoj

[Surender Gupta]

These type of reimbursements etc. should be decided on the basis of mutual agreement, facts and circumstances. After details analysis of all the issues, you may refer to valuation rule in which deduction is allowed in the hands of pure agent.

AI Summary

Pure agent principle can exclude reimbursements from service tax when valuation rules and agreement confirm pass-through status.
Applicability of service tax to collections for building insurance and ground rent depends on the contractual allocation, factual role of the collector, and the valuation rules: where the collector qualifies as a pure agent, the valuation rules permit deduction of such reimbursements from the taxable value.