Provisions of service tax - Renting of Immovable Property

[Guest]

We are a Ltd Co. and wish a clarification for attraction of provisions of service tax on Renting of premises to Post office situated in our factory complex from which we are collecting monthly rent. Is it covering in the service tax under 'Renting of Immovable Property' Services or any exemption is there.

[Surender Gupta]

Except an exemption of Rs. 8 lakhs in case of small service provider, no other exemption is available.

[Madhukar N Hiregange]

The question which requires to be addressed is whether the post office is one which is involved in furtherence of business or commerce. That is to say whether the postal department is a commercial concern. If not probabaly the need to charge the rent may not exist. I am providing some foof for thought asnd not my view conclusively.

[SURENDRA JOSHI]

Renting of Immovable Property attracts Service Tax when the send renting have been given for the purpose of business or for commercial use. Renting to Post Office is renting to government for the purpose of performing Sovereign function and not for any business or commercial use. Thus in my view , this should not attract Service Tax.

[sudhir V S]

Dear Mr. Garg, The definition of the renting of immovable property states that "used in the course of furtherance of business or commerce". Hence now the question arises is whether a post office a commercial concern? If it is affirmative then it shall be liable. Hence we need to see the intention of the service provided by the post office, it is more for the connivance of the public and not to make a profit. But it there may be some contrary opinion. Hence u can resolve the issue accordingly.

[Guest]

Pl refer Master Circular 96/2007 - Reference 999.02 dated 23.8.07 where it is clarifed that services of speed post, Insurance, agency service etc provided by Department of posts are business activities and not in the nature of soverign functions and hence liable for Service tax. Thus, if the premises is rented out to Post office carrying out such activities, then the same is covered under 'renting of immovable property service'.

AI Summary

Renting of Immovable Property: rent to postal services used for commercial activities is liable to service tax under renting services. Renting of immovable property is taxable when the premises are used in the furtherance of business or commerce. A small service provider threshold exemption exists, but no broader exemption is available. Postal activities performed as sovereign public functions would not amount to business use and thus not attract service tax; however, where postal operations are classified as commercial/business activities (examples cited include speed post, insurance and agency-like services), renting premises to such postal functions is covered by the renting of immovable property service and liable to service tax.