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Is ST applicable on rent of land for construction of building

Sireesha Gorti (Sole Proprietor) (174 Points)

17 December 2012

Hi,

can anybody inform me as to whether service tax is applicable for rent on the land given to my client for construction of building.

The lease deed states that ST has to be borne by the lessee.

Further, the lease of Rs. 10 L p.m has come into force on 1/1/2012. But, my client has not accounted for the ST.

Kindly help in accounting for the ST from 1/1/2012 as there is a change in ST rates wef 1/4/2012.

Thanks

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4 Replies

Sumit Grover (Chartered Accountant ) (3652 Points)
Replied 17 December 2012

As amended by Budget 2010, "The lease of vacant land, for construction of a building at a later stagee to be used for furtherance of business or commerce" was excluded from the ambit of service tax.

But after July 1, 2012, the same shall become taxable, since it is not specifically excluded in the negative list/ exemption list.

Sireesha Gorti (Sole Proprietor) (174 Points)
Replied 18 December 2012

Thanks Sumit for the reply.

But, i still have a confusion. It is that...the land under consideration is being used by my client for the construction of a hospital. Since services of Healthcare is in exemption list, so, is the lease rental under the purview of ST.

CA Chandrashekar L (Practicing Chartered Accountant) (245 Points)
Replied 18 December 2012

a) Sl.no. (2) of Notification No.25/2012 , Health care services by a clinical establishment, an authorised medical practitioner or para-medics as been exempted.

b) “health care services” means any service by way of diagnosis or treatment or care for illness,

injury, deformity, abnormality or pregnancy in any recognised system of medicines in India and

includes services by way of transportation of the patient to and from a clinical establishment,

but does not include hair transplant or cosmetic or plastic surgery, except when undertaken to

restore or to reconstruct anatomy or functions of body affected due to congenital defects,

developmental abnormalities, injury or trauma;

From the above It is to be noted that its no were states exemption relating to Lease rental.

c) And also as per section 66E relating declared services, renting of immovable property attacts service tax.

d)However "Immovable property" as not been defined in the Finance Act 1994.

But in terms of section 4 of the General Clauses Act 1897, The definition of immovable property includes 'LAND' as provided in sub -section 3(26) of the General Clauses Act .

e) Finally from the above rental income will come under the perview Service tax.

Thanks & Regards,

CA Chandrashekar L