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STAY ORDER FOR SERVICE TAX ON RENT

Anjaneyulu (Private Service) (58 Points)

02 March 2009

Mumbai high court granted interim relief from payment of service tax on rent of property till the final order in this regard is issued by Supreme court. The matter came up for hearing in the Bombay High court on July 30,2008.

My question is that, is it also applicable in Delhi. Can the assessee defer in making service tax payment on rent. Please clarify

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7 Replies

CA Biswaranjan (job) (149 Points)
Replied 02 March 2009

Order of bombay high court is valid in maharastra only. other states may follow this order voluntarily. once the order comes from SC it will be the law of land. so it may not be valid in DELHI.

1 Like

Rajesh Kumar (Advocate- Tax) (7806 Points)
Replied 02 March 2009

Although imposition and collection of service tax has been stayed, the landlord must manage his affairs in such a way that in future when liability comes, he can pay it.

Taxation statutes are rarely struct down by courts, and i dont think this is one tax which will be struck down. Further, as service tax is imposed through residual power (entry 97 of Union Schedule), I think the tax will survive constitutional scrutiny.

CA Sanjeev Kr Jain (c a) (1477 Points)
Replied 20 March 2009

pl send me the copy of Mumbai high court order & also of Madras high court order on the issue of service tax on rent. Else let me know the exact status of these suits and also if the property owner in Delhi has to pay the service tax on rent or not

Anjaneyulu (Private Service) (58 Points)
Replied 21 March 2009

Pls note the mumbai high court stay order

Court : Mumbai High Court

Brief : :

Citation :

Judgment :

MUMBAI: Bringing some cheer to modern retailers in an otherwise troubled market, the Bombay High Court granted interim relief from payment of service tax on the rents of immovable property. Retailers will not have to pay service tax till the final order in this regard is issued by the Supreme Court (SC).

The petitioners will have to file a written undertaking stating that in the event the challenges against such tax was disallowed, they will pay the amount due in accordance with the statutory provisions, the court observed. The Retailers Association of India (RAI) had filed a writ petition challenging levy of service tax on property as unconstitutional. The matter came up for hearing in the Bombay High Court on July 30, 2008.

The provision to levy 12% service tax on commercial rentals came into force on June 1, 2007 as part of the 2007-08 Union Budget. Future Group CEO Kishore Biyani said, “There is some clarity on the matter now. It is a relief for the retailers as this dispute had been there for some time now.” RAI CEO Gibson Vedhamani said, “We had earlier approached the Finance Ministry, Government of India to withdraw the particular tax. This is welcome relief to all our retailers.”

Industry watchers say the relief may be temporary since a stay order by the Bombay High Court essentially means that till the date of issue of order by the SC, retailers need not pay sales tax. “If the SC order favours the government, retailers would be required to cough up a significant sum as sales tax between the time of the stay order and judgement.”

Real estate developers too are upbeat over the move. “Easing the sales tax burden on retailers will help us negotiate the rentals better. Given the current market scenario, it is certainly a great relief,” said Sandeep Runwal, director, Runwal Group.

1 Like

Anjaneyulu (Private Service) (58 Points)
Replied 21 March 2009

Pls note Madras High court stay order

Tax relief for retailers on the anvil?

2007-10-27 14:13:24 Source : moneycontrol

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The Madras High Court has granted an interim injunction to a restaurant that had filed a writ petition, challenging the Finance Ministry's decision to charge service tax on rent, reports CNBC-TV18.

The Madras High Court is hearing a case that could have big implications on the rental of office space. General Star Kitchen, a Chennai-based restaurant chain, has got an interim injunction limiting the Finance Ministry from collecting service tax on the rent of commercial property. The Union government, in this year's budget, had levied a 12.36 % service tax on the gross rent of commercial spaces. Many retailers saw this additional cost eating into their profits. General Kitchen's writ petition has challenged this order, stating that it is only the state government that has the power to levy tax on land and buildings.

“The petitioner is contending that the union government has no power to levy service tax on commercial buildings. This is the subject that only state governments have exclusive powers on. The second point on which we are challenging is that it is not a service at all,” said Sreenath Sreedevan, Advocate, General Star Kitchen.

And there are also two similar cases filed by retailers, which are pending before the Bombay High Court.

The General Star Kitchen case is being very closely followed by the Indian retail and real-estate industries. They say the interim judgement gives them hope, that there is a legitimate case, against the levy of service tax on rentals, which is something the industry has been widely hoping for.

Thanks and regards

Anjaneyulu

CA Sanjeev Kr Jain (c a) (1477 Points)
Replied 21 March 2009

sir Anjaneyulu you are really great, thanks for providing the information. pl also guide what shoild i do as the owner has let out the property in delhi in feb 09 at monthly rental of 10 lacs. should he take registration or not, or after taking registration should the pay the service tax or hold till the decision of the high courts

Anjaneyulu (Private Service) (58 Points)
Replied 21 March 2009

Mr. Sanjeev

Being other state high court stay order are not valid in Delhi, I think the person should register himself with Service tax authorities and start collecting Service Tax on Rent and deposit accordingly. There is no other option.