Is service tax liable to be paid if not mentioned in lease a

Dear Omkar,

Liability under service tax would be created as per statutory definition of service after introduction of Negative list of services and not about mentioning this clause in the lease agreement.

For example 

A = Assessee

B = Landlord

In the present case if B crosses 10 lakhs in a year then he has to charge service tax to A.

if not crossed then he can claim small scale exemption presecribe as per 33/2012 ST.

Renting of immovable property tax is taxable and there is property tax paid deduction.

Originally posted by : Omkar Shirsat
	Hii Experts... Need an opinion on a practical issue:   The assessee has occupied factory on lease. However, there is no clause mentioning that service tax shall be levied on the agreed lease rental. In such a situation, is the assessee liable to pay service tax portion to the lessor?   Case A - Service tax charged by lessor, no mention in lease agreement, not deposited to the credit of govt. Case B - Service tax charged by lessor, no mention in lease agreement, deposited to the credit of govt.   In case of absence of such clause, shall the lease rental be assumed to be inclusive of service tax? Kindly guide in this regard. Also quote any legal pronouncements if you can.   Thanks! :)

Since the Assesse has occupied the factory on Lease. Firstly You will have to identify whether it is a operating lease or financial lease. In case of operating lease there is only transfer for use and not the transfer of right to use. Hence it will fall in the declared service u/s 66E clause f.

But if it is a finacial lease then it will become a part of Deemed Sale provision which are specifically excluded from the definition of service. Hence we will need to seprate the value of asset and the interst portion. Interest received is also subject to abatement of 90%. Please note abatement is only available in case of interest and not other charges like processing fees or documentation fees.

But if no tax is charged, in my opinion, we can assume it to be inclusive

In  such  cases  the  Agreement  provides  that  Rent  is  payable  on  mobthly  basis  and  the  date  on  which  the  payment  shall  be  made  by  the  service  receiver  is  also  provided  in  the  Agreement. If  the  period  of  providing  the  service  is  more  than  3  months  it  will  be  considered  as  continous  servoice  as  defined  in  Rule  2(c)  of  Point of  Taxation  Rules  2011. The  date  on  which  payment  of  service  has  accrued  will  be  considered  as  point  of  Taxation  for  thr  purpose  of  payment  of  service  tax  and  service  tax  shall  be  payable  on  5th  or  6th  of  the  following  month  as  provided  in  Rule  6  of  service  tax  Rules.

Since  the  said  service  is  exempted  from  Reverse  charge  mechanism  Rules  the  liability  to  pay  service  tax  shall  be  on  the  service  provider,  subject  to  threshhold  exemption  of  Rs  10  lakhs.

G.M.Nadkarni,  AICWA, ACS, MFM,Dip  IFRS