Is service tax applicable on forfeiture of security deposit

Kindly advice the applicability of Service Tax on Forfeiture of Security deposit in a Lease agreement.: - Q.1. Does this needs to be taxed as rent?   Q.2. If yes, is service tax applicable?   Q.3. Also please advice on the applicability of service tax on compensation to be paid on cancellation of lease agreement before the expiry of term?

Thank you

Replies (1)
Yes, the deposit forfeited on cancellation of an agreement to provide service shall be in the nature of consideration towards the service and shall be taxable under Service Tax.

Further any compensation paid for cancellation of lease would also be in the nature of consideration.

Thus both deposit forfeited and the damages paid are liable to Service Tax.

Hope the above clarifies.

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