Live Course on Drafting of Appeal and Reply of Penalty Notice by CA Sachin Sinha. Register Now!!

Liability of service tax

Gourav (44) (70 Points)

04 February 2016

Respected Members & Students,

A company has taken a guest house and a godown on rent on fixed monthly rent of Rs.97500 and Rs.200000 PM the land lord is an individual & not collecting any service tax from the company.My question is whether the company will be held liable in future to pay the service tax instead of landlord .Since the yearly value of service exceed Rs.10 Lac the owner will also not enjoy any SSP exemption.

Please suggest me whether the company will be held liable to pay the service tax or the individual and if the company will be held liable please provide me circular number so that i can prove it.

Reply
Follow
Share

7 Replies

Ajay Chandramouli (Article Assistant ) (334 Points)
Replied 04 February 2016

Dear Mr. Gourav

It is always the service provider who is liable to collect and pay service tax to the department. The department can not enforce you to pay the same.

But the landlord can collect the same from you if the agreement says "Applicable taxes from time to time extra" under Indian Contract Act

So please ensure the clauses of contract so that he cannot demand even intrest in future date

Gourav (44) (70 Points)
Replied 04 February 2016

No such provision is there in the agreement.

Gourav (44) (70 Points)
Replied 04 February 2016

As a registered entity department can demend the liability from the company ?

Ajay Chandramouli (Article Assistant ) (334 Points)
Replied 04 February 2016

Dear Gourav

No the department cannot demand from you

CMA Poornima Madhava (CMA) (13097 Points)
Replied 04 February 2016

I agree with Ajay. Moreoever, since Rent does not fall under the ambit of reverse charge mechanism, department cannot ask you to pay something, the liability of which does not exist at all.

Gourav (44) (70 Points)
Replied 04 February 2016

PEAREY LAL BHAWAN ASSOCIATION Versus SATYA DEVELOPERS PVT LTD - 2010 (10) TMI 137 - DELHI HIGH COURT decided on 20 October 2010.

Gourav (44) (70 Points)
Replied 04 February 2016

On the basis of registered entity concept department can ask the landlord to pay service tax ? Since service tax is a indirect tax, i think the burden can transferred and department can charge the recipient to pay the tax. PEAREY LAL BHAWAN ASSOCIATION Versus SATYA DEVELOPERS PVT LTD - 2010 (10) TMI 137 - DELHI HIGH COURT decided on 20 October 2010.

Read more at: /experts/modify_message.asp?entry_id=1053472