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Service tax in p&l

bhargavi ( Finance manager) (90 Points)

13 August 2012

Hello,

we have offices in two premises for which we are paying rent. The lessors are not registered under service tax and so do not charge service tax in their invoices. Hence we have not paid any service tax on rent of both the premises. however per the recent amendement we need to pay service tax from 2009 onwards. The lessors are not ready to get registered under service tax. so we can not claim the input credit. Can we claim the amount as a business expenditure u/s 37?? please advice.

Thanks and regards,

Bhargavi.

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3 Replies

CA. Subhash Dangi (Chartered Accountant) (1784 Points)
Replied 13 August 2012

It is the obligation on the part of lessor (Owner of commercial building) to get register under the Act and accordingly he can raise the invoice including service tax.

Since the lessor is not registred under service tax, u need not bother about his obligation for service tax rules and regulations.

The question of availing CENVAT or input credit does not arise as the lessor of building not included or charged the service tax in his invoice.

U can not claim as business expenditure U/s 37 of IT act since it is not lawful.

bhargavi ( Finance manager) (90 Points)
Replied 13 August 2012

Dear Subhash,

Thank you so much for your reply. I understood that we can not claim the input credit. However, as per the new amendment we have been adviced to pay the arrears of Service tax (from 2009 to March 2012) to the government. How should we treat this expenditure. please explain.

Thanks a lot in advance.

Regards,

Bhargavi.

CA. Subhash Dangi (Chartered Accountant) (1784 Points)
Replied 13 August 2012

Service tax is nether expenditure not income as the its is being charged or collected on billing to customers and same is remited to Govt.

If service tax not collected or charged for which ST is chargable on applicable service as per the amedned laws, then you are bound bear the amount of service tax laibility. Such statutory payment to Govt is not allowable as expenditure under IT act if ST is not collected from the customers.

It is not clearly mentioned in your query regarding the payment of arrears of service tax (from 2009 to 2012) under which category of services is applicable under the amended laws.