Is TDS applicabe for rent for Office if so what is the limit & Rate of Tax Service Tax on Commercial Renting has come into force with effect from 1st June 2007 vide Notification No 23/2007-Service Tax dated 22nd May 2007. However, Property Tax amount has been exempted while calculating service tax on commercial renting vide Service Tax Notification No. 24. Further, those landlords whose rent receipts are below Rs 8 Lakh from 1st June 2007 to 31st March 2008 will also be exempt from service tax vide Notification No. 6/2005-Service Tax as amended by Notification No.4/2007-Service Tax subject to the conditions of Notification. Even those whose rental receipts are above Rs 8 lakh will be required to pay service tax only after crossing receipts of Rs 8 Lakh.
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Landlords bowled out by Tenants on Service Tax liability
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The levy of Service Tax on commercial renting with effect from 1st June 2007 has added to the tax liability of Landlords who were hitherto enjoying lucrative rent on commercial properties owned by them. Though landlords are trying to pass on the burden of service tax to the tenants but many tenants have already refused to share the burden of service tax.
According to RS Sharma Advocate the landlords being a service provider are liable to pay service tax to the Government under the service tax laws. The landlords are also required to be registered with the Service Tax Office having jurisdiction over the location of the property. The demand of service tax will be issued by the service tax department to the landlord. Even if a tenant does not reimburse service tax to the landlord ; the landlord will have to pay service tax on his own. It can not be an excuse for not paying service tax that the tenant has not paid the service tax component to landlord. The only remedy available to landlords is to file a suit for recovery of service tax from the tenants.
In most of the cases; the existing rent agreements have no clause about the service tax and in the absence of such clause; it is not easy for landlords to recover service tax from the tenants. However, in cases where the rent agreement has a clause like 鈥渁ll future tax liability arising out of this agreement will be paid by the tenant鈥? the landlords may be successful in recovering service tax from the tenants.
The only solace to landlords is that the Property Tax amount paid can be deducted from the rental value for payment of service tax. Further, small landlords whose rent receipts are below Rs 8 Lakh from 1st June 2007 to 31st March 2008 will also be exempt from service tax vide Notification No. 6/2005-Service Tax as amended by Notification No.4/2007-Service Tax subject to the conditions of Notification. Even those landlords whose rental receipts are above Rs 8 lakh will be required to pay service tax only after crossing receipts of Rs 8 Lakh
The scope of 鈥渞enting of immovable property鈥?under the service tax includes renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce but does not include-
(i) renting of immovable property by a religious body or to a religious body; or
(ii) renting of immovable property to an educational body, imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching centre;
The term鈥渇or use in the course or furtherance of business or commerce鈥?includes use of immovable property as factories, office buildings, warehouses, theatres, exhibition halls and multiple-use buildings
"taxable service" means any service provided or to be provided to any person, by any other person in relation to renting of immovable property for use in the course or furtherance of business or commerce.
鈥渋mmovable property鈥?includes鈥?br>
(i) building and part of a building, and the land appurtenant thereto;
(ii) land incidental to the use of such building or part of a building;
(iii) the common or shared areas and facilities relating thereto; and
(iv) in case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate,
but does not include-
(a) vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes;
(b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land;
(c) land used for educational, sports, circus, entertainment and parking purposes; and
(d) building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities.
An immovable property partly for use in the course or furtherance of business or commerce and partly for residential or
any other purposes shall be deemed to be immovable property for use in the course or furtherance of business or commerce Yes. Service tax is applicable for rent from commercial complex. The rate is 12.36% @ rent received if the rent received by the person exceeds Rs. 8,00,000/- ( i.e., total rent income from all his commercial properties) The other two learner person have covered the answer to the problem in detailed. But let me tell you that Rs. 8 Lacs is a very specific exemption with lots of IFs and BUTs and may not be available year to year. Also do not take the exemption if you expect your annual rent to be more than Rs. 8 Lacs.
This may create practical problems with the department and they may even harrass you only on this score. Your case may case also land up in litigiation which itself is a very costly affairs.
I suggest before taking any decision on availing on taking exemption take professional advise of a PROFESSIONAL.
Regards,
CA. Deepak Bholusaria |
