Chronological legal history of provisions relating to service tax on renting of immovable property.
A. 01.06.2007 by Finance Act, 2007 Section 65 (90a) Renting of Immovable Property includes renting, letting, leasing, licensing, or other similar arrangements of immovable property for use in the course of furtherance of business or commerce but does not include-----
(i) by a religious body or to a religious body
(ii) to an educational body other than commercial training or coaching Section 65(105)(zzzz)
Taxable service means any service provided or to be provided to any person by any person in relation to renting of immovable property for use in the course or furtherance of business or commerce.
B. Home Solution Retail India Limited (Delhi High Court) 2009 Held that renting out of immovable property itself is not a service connected with renting of immovable property and hence not taxable service as per the terms of section 65(105)(zzzz).
C. Finance Act, 2010 amended definition of taxable service retrospectively with effect from 01.06.2007 Section 65 (90a) Renting of Immovable Property includes renting, letting, leasing, licensing, or other similar arrangements of immovable property for use in the course of furtherance of business or commerce but does not include-----
(iii) by a religious body or to a religious body
(iv) to an educational body other than commercial training or coaching Section 65(105)(zzzz)
Taxable service means any service provided or to be provided to any person by any person by renting of immovable property or any other service in relation to such renting of immovable property for use in the course or furtherance of business or commerce. 04.08.2011 Bombay High Court. The Retailers Association of India Upheld the constitutional validity of service tax on renting of immovable property. 28.09.2011 Supreme Court in The Retailers Association of India Stay on Retrospective amendment made by finance act, 2010 but no stay for service tax for the period from 01.07.2010. Finance Act, 2012 (After introduction of negative list with effect from 01.07.2012). Renting has been considered as Declared Services chargeable to tax. Further Section 80(2) provides that no penalty shall be imposable for failure to pay service tax which is payable as on 06.03.2012 on renting as referred to in 65(105)(zzzz) subject to condition that the amount of service tax along with interest is paid in full within a period of 6 month from the date on which the finance bill received the ascent of the president.
The finance bill 2012 received the assent of the president on 28.05.2012. Conclusive Opinion On the basis of above chronological history, our final opinion is being given in 3 parts as under:-
1. For the service tax pertaining to period after 01.07.2010, there is no doubt that as of now there is no tax relief from any court in favour of service provider. Rather various high courts have confirmed the taxability in favour of the revenue. And to avoid penalty, it is recommended that such tax be deposited along with the interest before 27.11.2012.
2. For the service tax pertaining to period prior to 01.07.2010, there is one stay by Supreme Court in the case of Retailers Association but the decision is still pending and it may go either way. Further even the stay is given subject to 50% payment of tax. Thus, to avoid future eventuality regarding penalty which may go up to 200% of the service tax amount, it is better to adopt benefit of section 80(2). However, the assessee may opt to pay the duty under protest.
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