hello, happy new year to all
I am in doubt, the question is "It is said in the lease deed the service tax will be paid by the lessee,the lessee is bank and the lessor is individual. The lessee(Bank ) is paying rent to six different lessor . bank is paying rent 480000p.m among the lessor. my question is what are the service tax liabality arise from the point of view of Bank(lessee)
As per the information provided by you, Bank is the service recepient. Service tax has to be collected by service provider from the service recepient and the same has to be paid to government by service provider. In a sense, service provider acts as a tax collecting agent for government. Rule 2(1)(d) of Service Tax Rules, 1994 defines "Person liable for paying service tax", wherein certain service recepients have been made liable to pay tax. Banks are not specifically covered as service recepients required to pay tax. Hence, in my opinion service provider (lessor) has to collect & pay service tax to government. Yes, the tax would definitely be charged from the bank. The bank will be required to pay rent along with service tax to the lessors, subject to the other conditions of rent agreement.
Looking from bank's point of view also it seems that there is no default on the part of the bank. Bank is not responsible to see whether or not the service tax is collected by the receiver of rent. In absence of any specific provisions in Service tax law in your case, service tax has to be deposited by receiver of rent only. Just by inserting a clause in the lease deed, one can not play with the service tax provisions and shift the liability to pay service tax to another person. Service Tax is required to be deposited under Service Tax Registration Number of output service provider only, in your case it is the receiver of rent. It is possible that bank pays service tax on behalf of the receiver of rent under service provider's registration number, but that is an arrangement between the bank & the receiver of rent. Liability to pay would always be with the service provider. In case of default, proceeding would be carried out against service provider under the provisions of Service Tax. Where service provider has not charged service tax separately, whatever is received by him would be treated as gross amount received inclusive of service tax and tax will be ascertained by reverse calculation.
Depending on the terms of the agreement between the parties, bank may also deposit the tax on behalf of lessor, but under lessor's registration number as he is the provider of service.
thanks sir
I entered lease agreement to ltd., co., in the year 2008 not mentioning about service tax. my annual rental income is Rs.8lakh, now my annual rent income is Rs.15,00,000.00. I want to collect service tax from lessee and paid service tax department. tenant argue rent includes service tax. I said our agreement only for rent i bear all taxes but not mentioning about service tax. I say it is mandatory that service tax is bear by lessee apart from rent. Tenant ask is there is any notification. kindly help in this case you will do the needful.
CAclubindia
