Service tax on lease rent - query

Present scenario. Company A (Government company) has leased out bulding to Company B on a rent of RS. 100000/- (no Service Tax is charged by Co. A. Company B in turn sublease the property entirely to Company X on a rent of Rs. 100000/- ( No Service tax is charged by Co. B till now.)

Question. 1. Is service tax is applicable on this transaction? If yes, can Company X can avail Cenvat credit on the service tax paid on lease rent?

Question 2.What is the % of service tax? Any abatement is there on lease rent?

Question 3. Is TDS is to be deducted to be deducted on the whole amount including service tax or only on Rent? Agreement does'nt states about Service tax or TDS portion and the value is ..

 

Expecting the reply at the earliest

Replies (2)

Dear Sivakumar,

 

Question 1

  • There is no distinction under Service tax law for taxability. Thus, service provided by government would also be liable to Service tax. Since, the services are renting of immovable property, the service tax has to be charged by Government to B and then by B to X.

  • It is a separate issue to be determined in terms of Rule 2(l) of the Cenvat Credit Rules, 2004. However, in general, if this service is used for provision of a taxable service or manufacture of an excisable product, then X should be eligible for Cenvat credit.

  • However, there is an exemption to rent on residential dwellings used for residential purposes. Please check whether it is eligible for such an exemption.

 

Question 2

  • 12.36%. No abatement available.

 

Question 3

  • TDS to be asked separately under Income Tax Forum.

Thank yoy Vikas Vishwakarma

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