Renting of immovable property: which value to be taken?

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yashsr (Querist)

26 January 2013 Hello,

What is the value of Renting under the head 'Renting of Immovable Property' taken into account? Is it the Rent itself or 'Rent minus Municipaly Taxes Paid/Payable'?

There is a commercial property which a Partnership Firm has rented out for Rs.1 lac per month which makes it Rs.12 lacs per annum. However, Municipal Taxes(total of paid and payable) amount to Rs.3 lacs. Will service tax be applicable considering there are not other services provided by the Partnership Firm?

Kaushik Vinod

Kaushik Vinod (Expert)

26 January 2013 Dear Yashsr,

As per Notification No.29/2012-ST dated 20-06-2012 the municipal tax is deducted from the gross amount charged for renting.

Thanks

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yashsr

yashsr (Querist)

27 January 2013 If rent is Rs.85000 per month(before TDS deduction) which means annually Rs.1020000. Now if municipal taxes are Rs.2000 per month, net figure is Rs.996000?

Will service tax apply? When you see the taxability as per the 10 lacs clause, do you see gross or net?

Kaushik Vinod

Kaushik Vinod (Expert)

27 January 2013 Dear Yashar,

The Question relates to Notification No.29/2012 and Notification No.33/2012 and the If we together read both the notifications then answer is yes the municipal taxes are not part of gross amount charged and these are out of ambit of Section 66B.
Extract of both the notifications are given as follows :
33/2012-"aggregate value" means the sum total of value of taxable services charged in the first consecutive invoices issued during a financial year but does not include value charged in invoices issued towards such services which are exempt from whole of service tax leviable thereon under section 66B of the said Finance Act under any other notification."

29/2012: it is necessary in the public interest so to do, hereby exempts the taxable service of renting of an immovable property, from so much of the service tax leviable thereon under section 66B of the said Finance Act, as is in excess of the service tax calculated on a value which is equivalent to the gross amount charged for renting of such immovable property less taxes on such property, namely property tax levied and collected by local bodies:

No Service tax attracted in your case.

Thanks

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yashsr

yashsr (Querist)

27 January 2013 Thanks again for the perfect reply!

One more question though: Assuming rent(after setting off municpal taxes) is Rs.85000 per month i.e. Rs.1020000, if I take input credit of service tax paid on maintenance, will this affect the applicability of service tax in our case?

In other words, does taking of 'Input Credit' effect the taxability or applicability of Service Tax relating to the '10 lac rule'?

Kaushik Vinod

Kaushik Vinod (Expert)

27 January 2013 If you are opting this SSI exemption then you can not take the CENVAT Credit till 10 lacs.
The decision is up to you whether to opt or not to opt this exemption of 10 lacs.

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yashsr

yashsr (Querist)

28 January 2013 Thanks!

My question is if the taxable services provided is Rs.1020000, can taking of input credit some how bring this within the 10 lacs limit and make it not taxable?

Kaushik Vinod

Kaushik Vinod (Expert)

30 January 2013 I advise you to refer some good book on Service tax and then discuss specific query.

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yashsr

yashsr (Querist)

30 January 2013 Hey Kaushik,

My query is actually resolved now! Thanks for all your help!

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