Service tax Payable if property leased out against a Lumsum

Interest earned on the deposit is in effect rent of the property.

law is not clear as to what interest rate should be taken. Take PLR of some bank, say State bank for interest rate.

It depends on how the contract/agreement is built up, if agreement says that deposit is interest free and refundable at the end of the period then interest will not be considered as consideration for rent.

Otherwise the rental can be considered on prevailing market rate for rental in vicinity.

An alterante view is that if the transaction is a transaction of mortgage the question of liability may not be there.

If considered taxable the rate of borrowing for that person maybe considered as in case of advance for supplies having a nexus to the value of manufactured goods. This apsect would get litgated and unitl then a reasonable method could be followed.

If some method followed intimation to dept maybe preferable to avoid penal consequence as well as longer period invocation.