Service Tax on Immovable Property

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vinay ahuja (Querist)
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03 April 2008 As our tenent has refused to pay the service tax on the rent amount of
Rs. 210000 per month. Can we now consider the total rent amount reveived now of Rs. 210000 per month as RENT including service tax i.e. (186900+23100 service tax)???
Can we now deposit service tacx of 12.36% on an amount of 186900 or Rs. 23100 instead of 12.36% of Rs.210000 which works out to be Rs. 25956 ?
Thanks

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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03 April 2008 It depends upon whether you give up your claim or not. That is if you give up the claim and accept that the amount is inclusive of ST.

R.V.RAO

R.V.RAO (Expert)
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03 April 2008 THE RENT AMOUNT IS DECIDED AS PER THE RENT AGREEMENT OR RENEWAL AGREEMENTS WHICH (IF ANY) YOU HAVE FILED WITH CENTRAL EXCISE DEPT, AT THE TIME OF SERVICE TAX REGISTRATION .
WHATEVER YOU HAVE DECLARED IN THAT RENT AGREEMENT AS RENT , IS THE AMOUNT ON WHICH YOU NEED TO COLLECT SERV. TAX @ 12.36% AND DEPOSIT SAME WITH GOVT.
IN CASE YOU HAVE NOT FILED ANY RENT AGREEMENT WITH THE DEPT, NOR DEPOSITED ANY SERV. TAX SO FAR ON THIS AMOUNT OF RS. 210000 AS STATED BY YOU IN YOUR QUERY ,THEN YOU MAY REVISE YOUR RENT AGREEMENT AS YOU WISH.
OTHERWISE YOU ARE LIABLE TO PAY THE SERV. TAX FROM OUT OF YOUR RENT OF RS. 210000 RECEIVED BY YOU.
HOW YOU RECOVER OR WHETHER AT ALL YOU ARE ABLE TO REVOVER OR NOT IS NOT AN ISSUE TO THE DEPT.
THE QUESTION OF RECOVERY IS AN ISSUE TO BE DECIDED BY YOU.
YOUR LIABILITY TO THE GOVT. AS SERVICE PROVIDER IS ABSOLUTE,AND THERE IS NO ESCAPE.
R.V.RAO

K V Subba Rao

K V Subba Rao (Expert)
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03 April 2008 Rs 23100 is correct as per Explantion 2 to Sec 67 of Finance Act 1994 (Source: Page 440 of 5th edition of P Veera Reddy's Guide to Service Tax)

Noting the spirit of Sri R V Rao's argument, if you are unable to collect Service Tax seperately, it may be safe to suitably draft the Rent Agreement to make it clear that the amount of Rs 210000 is inclusive of Service Tax

Dayal

Dayal (Expert)
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03 April 2008 I defer with the clarification, the rule is amply clear, that where service tax amount is not paid by the tenant, then the income on hand can be construed as including service tax.

You need to work backwards and pay the service tax.

I see no reason for modification of agreement, beacuse if at any point the tenant pays the service tax, the same can be worked backwards and service tax can be discharge accordingly.

vinay ahuja

vinay ahuja (Querist)
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04 April 2008 No, we donot want to lose our claim to recover the service tax and are going for the legal action against the tenent
( public ltd. Bank - SBI ). They have actually paid the service tax for three months i.e. for OCT 07, NOV07 and Dec.07 as per our Rent Bill after deducting T.D.S. too , but now refuse to pay saying that they have paid earlier by mistake. Then they have taken back the service tax amount from our rent for the month of Jan 08. Can they do all this and then stop paying the service tax altogether?? Also please note that we are now registered with Excise dept and have been paying service tax on 210000 for the past 6 months .

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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08 April 2008 If you are not giving up the claim, then it means you are confident of recovery. In such a situation you have to pay the ST on the rental value, in my opinion.

If you give up the claim the rental value you collect is deemed to be inclusive of ST.

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