Service Tax on Immovable Property
This query is : Resolved
01 May 2008
Does anyone know of any judgement passed in any court in India , in favour of landlords as far as collecting service tax amount from the tenents is concerned ???
Our tenent is refusing to pay the tax though the lease was written well befoe 01.06.2006 when this tax did not exist .
Is this a good excuse to get the place vacated , as we are not getting the Full rent ??
Our tenent is refusing to pay the tax though the lease was written well befoe 01.06.2006 when this tax did not exist .
Is this a good excuse to get the place vacated , as we are not getting the Full rent ??
02 May 2008
Service Tax on Immovable property came into froce from 1.6.2007. From this date renting of immovable property will come under Service Tax. At present there is no abatement or deduction towards input services is available. Some assessees have filed W.Ps in the respective high courts challenging the constitutional validity of service tax on immovable property. Courts have also stayed on this subject viz., bombay, Chennai and Delhi Courts. However final judgement on this issue is to be make by respective High Courts. Recently A.P High Court also given interim Stay on this issue.
Unless the court strucks down the notification of service tax on immovable property, the service provider required to pay Service tax on renting of immovable property.
Unless the court strucks down the notification of service tax on immovable property, the service provider required to pay Service tax on renting of immovable property.
02 May 2008
THE SERVICE PROVIDER IS RESPONSIBLE FOR COLLECTION AND DEPOSIT AND FILING RETURNS OF SERV.TAX.
THE REGISTARTION THERESHOLD LIMIT IS NOW RS. 9 LAKHS AND EXEMPTION LIMIT IS RS. 10 LAKHS P.A FOR SERV. TAX.
NON COLLECTION IS NO EXCUSE. BUT THE SILVERLINING IS ONLY SERV. TAX COLLECTED IS LIABLE FOR DEPOSIT.
IN YOUR CASE ,WHAT ALL YOU NEED TO DO IS REGISTER YOUR SELF UNDER SERV. TAX ACT .AND THEN PROVIDE TYOUR SERV. TAX REGN. NO TO YOUR TENANT.
ANY RENT AGREEMENT USUALLY PROVIDES A CLAUSE THAT ALL APPLICABLE TAXES / LEVIES FROM TIME TO TIME WILL BE PAID BY ANY LESSEE.
YOU MAY THEREFORE AMEND YOUR RENT AGREEMENT WITH TENANT.
IF HE/SHE STILL REFUSES TO enter a revised agreement or PAY UP SERV. TAX ,AS PER YOUR REVISED LEASE /RENT AGREEMENT , YOU MAY GIVE TERMINATION NOTICE AND TERMINATE THE LEASE.
GET A NEW LESSEE AND ENTER A NEW AGREEMENT WITH SERV. TAX CLAUSE AND that ALL OR ANY NEW TAXES/LEVIES UNDER LAW OF THE LAND ARE PAYABLE BY LESSEE .
R.V.RAO.
THE REGISTARTION THERESHOLD LIMIT IS NOW RS. 9 LAKHS AND EXEMPTION LIMIT IS RS. 10 LAKHS P.A FOR SERV. TAX.
NON COLLECTION IS NO EXCUSE. BUT THE SILVERLINING IS ONLY SERV. TAX COLLECTED IS LIABLE FOR DEPOSIT.
IN YOUR CASE ,WHAT ALL YOU NEED TO DO IS REGISTER YOUR SELF UNDER SERV. TAX ACT .AND THEN PROVIDE TYOUR SERV. TAX REGN. NO TO YOUR TENANT.
ANY RENT AGREEMENT USUALLY PROVIDES A CLAUSE THAT ALL APPLICABLE TAXES / LEVIES FROM TIME TO TIME WILL BE PAID BY ANY LESSEE.
YOU MAY THEREFORE AMEND YOUR RENT AGREEMENT WITH TENANT.
IF HE/SHE STILL REFUSES TO enter a revised agreement or PAY UP SERV. TAX ,AS PER YOUR REVISED LEASE /RENT AGREEMENT , YOU MAY GIVE TERMINATION NOTICE AND TERMINATE THE LEASE.
GET A NEW LESSEE AND ENTER A NEW AGREEMENT WITH SERV. TAX CLAUSE AND that ALL OR ANY NEW TAXES/LEVIES UNDER LAW OF THE LAND ARE PAYABLE BY LESSEE .
R.V.RAO.
02 May 2008
Thanks very much for your suggestions.
02 May 2008
Dear Mr.Rao,
Does it also mean that we DO NOT have to deposit the service Tax amount with the authorities each month till we are able to collect the same from our tanents???
So far we have been depositing the service tax amount each month from our pocket for the last 6-7 months and demanding the same from the same from the same from our tenanent ( State Bank Of Indore )vide our invoice (Rent Bill ) but they refuse to pay .
Please suggest if we should continue to deposit from our pocket. Thanks!
Does it also mean that we DO NOT have to deposit the service Tax amount with the authorities each month till we are able to collect the same from our tanents???
So far we have been depositing the service tax amount each month from our pocket for the last 6-7 months and demanding the same from the same from the same from our tenanent ( State Bank Of Indore )vide our invoice (Rent Bill ) but they refuse to pay .
Please suggest if we should continue to deposit from our pocket. Thanks!
02 July 2008
Still waiting for any response to my earlier question that since somr high courts in India have granted an interim injunction restraining the Union Finance Ministry from collecting service tax on rent of immovable property . DO WE STILL HAVE TO DEPOSIT SERVICE TAX EACH MONTH ( OUR TANENT IS REFUSING TO PAY ) OR WAIT FOR THE FINAL ORDER OF THE COURT ????
tHANKS!
tHANKS!
02 July 2008
IS IT TRUE THAT THE STAY HAS BEEN GRANTED BY THE HON. HIGH COURT RESTRAINING THE GOVERNMENT FROM COLLECTING SERVICE TAX ON IMMOVABLE PROPERTY (RENT).
24 July 2025
This is a classic and practical concern that many landlords faced after the introduction of service tax on renting of immovable property effective from **1st June 2007**.
Here’s a summary to clarify your doubts based on the historical context:
---
### 1. **Is landlord liable to pay Service Tax even if tenant refuses to pay?**
* Yes, under the service tax law, the **service provider is liable to pay service tax to the government**, regardless of whether the tenant pays that tax or not.
* In this case, the landlord is the service provider and must pay service tax on the rent charged for immovable property.
### 2. **Can the landlord recover service tax from tenant?**
* Legally, the landlord can demand service tax from the tenant as it is part of the rent service.
* Many lease agreements have a clause stating that the tenant must bear all applicable taxes and levies. If the existing lease does **not** have such a clause, the landlord can try to amend the agreement to include this.
* Without tenant’s consent, the landlord cannot unilaterally add this charge to rent already agreed upon before June 2007.
### 3. **Is tenant’s refusal to pay a valid excuse to terminate the lease?**
* Generally, refusal to pay any due rent (including agreed taxes) can be a ground for termination.
* However, since service tax became applicable only after June 2007, if the lease predates this without any tax clause, tenant might contest this.
* It’s advisable to **issue a proper legal notice** and seek legal advice before terminating lease to avoid disputes.
### 4. **What about court cases and stays?**
* Various High Courts (Bombay, Delhi, Chennai, Andhra Pradesh) issued **interim stays on service tax on renting of immovable property** citing constitutional issues.
* This means, in some states, the government was restrained from collecting service tax on rent temporarily.
* But **these stays were interim and limited to the petitioners**. The government can still proceed in other places.
* The **final verdict** was awaited in those years (2008-2010).
* **If you have a stay order applicable in your jurisdiction, you may temporarily hold payments**, but if no stay applies, service tax liability remains.
### 5. **Should landlords deposit service tax even if tenant refuses to pay?**
* Technically yes, the landlord is the service provider and must deposit the service tax on time to avoid interest and penalty.
* Recovering from tenant is a separate civil matter.
* If you do not pay, you risk penal action from the tax authorities.
* Some landlords chose to pay from their pocket while pursuing recovery from tenants.
---
### **Practical Advice:**
* Check whether your state’s High Court has passed any stay or injunction relevant to your case.
* Amend lease agreements for new tenants to include tax liability clause clearly.
* Consult a lawyer before initiating eviction based on tax refusal.
* Keep clear communication with tenants regarding the tax implications.
* Maintain proper service tax registration and file returns timely.
---
If you want, I can also help you with sample lease clause wording or a draft legal notice for tax recovery! Would that help?
Here’s a summary to clarify your doubts based on the historical context:
---
### 1. **Is landlord liable to pay Service Tax even if tenant refuses to pay?**
* Yes, under the service tax law, the **service provider is liable to pay service tax to the government**, regardless of whether the tenant pays that tax or not.
* In this case, the landlord is the service provider and must pay service tax on the rent charged for immovable property.
### 2. **Can the landlord recover service tax from tenant?**
* Legally, the landlord can demand service tax from the tenant as it is part of the rent service.
* Many lease agreements have a clause stating that the tenant must bear all applicable taxes and levies. If the existing lease does **not** have such a clause, the landlord can try to amend the agreement to include this.
* Without tenant’s consent, the landlord cannot unilaterally add this charge to rent already agreed upon before June 2007.
### 3. **Is tenant’s refusal to pay a valid excuse to terminate the lease?**
* Generally, refusal to pay any due rent (including agreed taxes) can be a ground for termination.
* However, since service tax became applicable only after June 2007, if the lease predates this without any tax clause, tenant might contest this.
* It’s advisable to **issue a proper legal notice** and seek legal advice before terminating lease to avoid disputes.
### 4. **What about court cases and stays?**
* Various High Courts (Bombay, Delhi, Chennai, Andhra Pradesh) issued **interim stays on service tax on renting of immovable property** citing constitutional issues.
* This means, in some states, the government was restrained from collecting service tax on rent temporarily.
* But **these stays were interim and limited to the petitioners**. The government can still proceed in other places.
* The **final verdict** was awaited in those years (2008-2010).
* **If you have a stay order applicable in your jurisdiction, you may temporarily hold payments**, but if no stay applies, service tax liability remains.
### 5. **Should landlords deposit service tax even if tenant refuses to pay?**
* Technically yes, the landlord is the service provider and must deposit the service tax on time to avoid interest and penalty.
* Recovering from tenant is a separate civil matter.
* If you do not pay, you risk penal action from the tax authorities.
* Some landlords chose to pay from their pocket while pursuing recovery from tenants.
---
### **Practical Advice:**
* Check whether your state’s High Court has passed any stay or injunction relevant to your case.
* Amend lease agreements for new tenants to include tax liability clause clearly.
* Consult a lawyer before initiating eviction based on tax refusal.
* Keep clear communication with tenants regarding the tax implications.
* Maintain proper service tax registration and file returns timely.
---
If you want, I can also help you with sample lease clause wording or a draft legal notice for tax recovery! Would that help?
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