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Service tax questions on commercial rental

Purple Yogi (Self) (26 Points)

06 July 2012

Hi,

We own (me + mother) own a commercial condo in hyderabad, which we leased out along with fit outs. Lease clearly calls out for seperate rental amount for dwelling (85,000 Rs/month) and for amenities (AC + cubicles etc).

The property was not rented during the prior fiscal year. It was rented out from April 1. Here are my questions

1) Should I collect service tax? Annual rent for dwelling is 85*12 = 10.2L So do i collect service tax on the full 85,000? or just the difference amount?

2) Should I collect and pay service tax on the rental of amenities (AC/Cubicles etc) ?? Those are not immovable property?

thanks for any insights

-Y

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7 Replies

Satish (CA Final Student) (479 Points)
Replied 06 July 2012

Dear Purple Yogi,

Both the things are liable to service tax. But you are entitle to a value based exemption of Rs. 10 Lakh as you have not received any rent during the preceding financial year. You need to register yourself on reaching the total rent of Rs. 9 lakh & you will be liable to pay service tax over & above 10 lakh i.e. on 20 thousand rupees. You need not charge now any service tax but once you cross 10 Lakh you need to charge & collect service tax on balance 20 thousand.

In the next financial year, you will not get any exemption as your gross rent during the preceding financial year would exceed 10 Lakh. So you need to pay the service tax right from the first rent i. e. April 13 unless the value based exemption limit is enhanced by the finance budget of the next year.

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Purple Yogi (Self) (26 Points)
Replied 06 July 2012

Thanks for the info. Do i need to register right now to avail the exemption? SHould I apply for it ? or is it automatic?

Ajit kumar Dubey (Taxation Manager) (637 Points)
Replied 07 July 2012

You need to apply for registration only when your taxable income crosses Rs 9lac, by that time seat and relax.

Purple Yogi (Self) (26 Points)
Replied 31 August 2012

Hi,

Sorry for seeming to ask same question again. But here are some more details

For us, rent for premises is 85000Rs/month and rent for amenities is 40,000Rs/month.

1) Do we get 2 different 10Lakh exemptions for premises and amenities?

2) Confirming that ameneties rent is also liable for service tax.

We could also use the advice of expert CA in Hyderabad - any recommendations?

thanks for all the advice

sathish (service tax ) (22 Points)
Replied 16 November 2013

Hai,

Myself sathish am having commercial property in G.S.T ROAD now am leaving for reant for first time and reant amount consist of one lakhs for this amount I need to pay service tax , weather

I need to collect service tax from tenon .

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sathish (service tax ) (22 Points)
Replied 16 November 2013

Hai,

Myself sathish am having commercial property in G.S.T ROAD now am leaving for reant for first time and per month reant amount consist of one lakhs for this amount I need to pay service tax , weather I should collect the service tax from tenon or land himself should pay.

Manoj Agarwal (Service Tax Consultant Rourkela ServiceTaxExpert@yahoo.com) (3456 Points)
Replied 16 November 2013

Dear Purple Yogi,

As you mentioned that the property is held jointly by you and your mother. As tax planning measure, you may enter into contract with your tenants in such a way that the total rent + amenities (85000+40000=125000) is so divided that each of your's taxable turnover is below Rs. 10 Lacs and you both can avail the service tax exemption vide N/N-33/2012 for all the years till the total consideration is Rs. 1,66,666/- per month.

I have assumed that you are not providing any other taxable service.

Kindly consult come Expert.