Applicability of service tax

Queries 1676 views 5 replies

Dear Members

One of my friend is having TWO immovable properties. One is purely rented out for residential purpose and the another is purely rented out for commercial purpose. There is no partial use of residential and commercial in both the buildings.

He is receiving rental income from both the properties - 

Rental Income from residential property is around Rs.4.00 lacs per annum.

Rental income from commercial property is Rs.12.00 lacs per annum. This 12.00 lacs includes maintenance charges, water charges....etc.

I request the members to advise me the following:

(1) There is an 10.00 lacs exemption limit for small service providers. In my case the said ten lacs exemption limit would be crossed only in the month of February every year. In view of the above, how to collect service tax from the tenants - whether to collect service tax for whole year or for the month of February and March alone.

(2) Whether rental services from both the properties would come under the purview of service tax act. (Note : This doubt arises because my friend has two propetires - one rented out exclusively for residential and one rented out exclusively for commercial. )

(3) Whether maintenance charges and water charges collected would come under the purview of service tax

with regards

Muralidharan

Replies (5)

Renting for residential purpose is not liable to service tax. Your commercial rent exceeds Rs.10L and thus liable to service tax. Test for the basic exemption is whether your value of taxable service exceeded Rs.10L in preceding year . If crossed Rs.10L in precedng year, exemption for Rs.10L is not available for current year. Mantenance charges and water charges to be included in the value of service.

Please remember when turnover crossed 9 lacs, Service Tax registration mandatory.

Dear Mr Muralidharan,

After crossing the basic exemption (threshold limit) of 10 lakh, you must get yourself registered under Service tax and start issuing rent debit note charging 10.3% service tax and showing your service tax registration number in the rent debit note for commercial property.  

You can collect the tax only after crossing 10 lacs, but this exemption is available for first year of operation.  From next accounting year, say april 12, you have to collect service tax from the beginning  itself.  If you tenant is doing any service, and is a registered assessee then, he can claim CENVAT credit based on your debit note.

 

rengaraj .r.k

 

 

Dear Mr.Rengaraj,

Pls clarify,Is it compulsory from next year even If the  threshold limit is not crossed.

Thanks & regards,

sadananda.

The question of paying service tax arises if only you have crossed the basic exemption limit and then only the registration process starts.  Therefore there is no necessity to collect service tax from next year if the total service income does not cross 10 lacs in the current year i.e period ending march 12.

 

i hope it is clear to you.

 

rengaraj .r.k


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