Service Tax on renting still uncertain

[Sucheta Agrawal]

Query- whether the service tax on the renting of immovable property is to be collected by the landlord for the past period?

The Delhi High Court, in the case of Home Solutions Ltd vs Union of India 2010 -TMI - 75874 - HIGH COURT OF DELHI, has held that the levy of service tax on renting of immovable property to be outside the scope of the Finance Act (and that only services in connection with such renting of property would be liable to service tax). The tax authorities filed a special leave petition against the order in the Supreme Court, which is currently pending hearing.

Thereafter, the Finance Act 2010 has amended the definition of 'renting of immovable property service' to include within the service tax net the activity of renting of commercial immovable property as well as any service relating to such renting. The amendment has been brought retrospectively from June 1, 2007 (ie. the date when renting of immovable property service was introduced).

Subsequent to the amendment, a writ petition was filed before the Delhi High Court by Home Solutions Ltd challenging the retrospective amendment. The high court granted a stay on the recovery of service tax on the activity of renting (since the court had earlier concluded that renting of immovable property by itself cannot be regarded as a service).

Further, the Andhra Pradesh High Court, in a writ petition filed by TRENT LIMITED Versus UNION OF INDIA and Others 2010 -TMI - 76270 - HIGH COURT OF ANDHRA PRADESH, has also stayed the retrospective levy of the service tax on renting of immovable property.

Given the above facts, it is advisable to request the landlord not to recover the service tax on renting of immovable property for the past periods until the above matters are disposed of by the courts.