Since notification levying service tax on rent of commercial properties has been held invalid, the service providers of such service has ceased to be provider of taxable service under this category. Where such service provider has obtained registration only for rent of commercial properties, they need to surrender the certificate to the Superintendent of Central Excise as required under Rule 4(7) of the Service tax Rules,1994.
In case the service provider is also registered for other services under the same registration certificate, he may continue to hold registration for such other services, in that case an application can be made for amendment of registration certificate or intimation can be given as required under Rule 4 (5A).
In case after exclusion of rent from value of total taxable services, the service provider is not liable to pay service tax due to less than thresh hold limit, in that case also he can apply for cancellation of registration or can intimate the authority that in view of low volume he is not entitled to charge service tax, so his registration may be cancelled..
Draft letter to surrender certificate of registration:
FROM Service tax assessee
The Superintendent of Central Excise, Range.
Service Tax Division-,
Service tax registration no………… Surrender of registration certificate for cancellation of registration under Rule 4 (7) of the Service Tax Rules, 1994.
The above certificate of registration was granted to us in relation to service of commercial renting covered by Section 65(105) (zzzz).
We hereby surrender our registration certificate for cancellation since the levy of service tax on rent has been held invalid and ultravirse the Finance Act, 1994. Therefore we have ceased to render any taxable service. Original registration certificate is enclosed as required under Rule 4(7) of the said Rules.
The rule reads as follows;
(7) Every registered assessee, who ceases to provide the taxable service for which he is registered, shall surrender his registration certificate immediately to the Superintendent of Central Excise.
We have paid service tax up to the month of … 2009 and there is no tax payable after declaration of the levy as invalid.
Therefore, we request you to kindly cancel our registration as required under sub rule (8) of Rule 4 of the Service Tax Rules 1994.
For your ready reference we mention that recently Delhi High Court has held that the notification levying service tax on rent of immovable properties let out for commercial purposes is not valid and is ultravirse the charging section 65(105) (zzzz) of the Finance Act, 1994. The judgment is reported as HOME SOLUTION RETAIL INDIA LTD. And others Versus UOI & ORS In Appeal No. - WP(C) 1659/2008 and others decided on 18 April 2009 and reported as 2009 -TMI - 33136 on www.taxmanagementindia.com. Relevant para 36 of the judgment is reproduced below:
"36. In view of the foregoing discussion, we hold that Section 65(105)(zzzz) does not in terms entail that the renting out of immovable property for use in the course or furtherance of business of commerce would by itself constitute a taxable service and be exigible to service tax under the said Act. The obvious consequence of this finding is that the interpretation placed by the impugned notification and circular on the said provision is not correct. Consequently, the same are ultra vires the said Act and to the extent that they authorize the levy of service tax on renting of immovable property per se, they are set aside."
In view of the above judgment we have been advised that we have ceased to provide any taxable service and we cannot continue to hold registration certificate and there is no need to pay further tax on rent. Kindly confirm the same.
We also request you to kindly extend all necessary co-operation to our tenants in the matter of refund of service tax paid by us under mistake of law, and passed over to tenants, if they have not availed CENVAT credit for the same and are otherwise eligible to get refund as per law.
We reserve our right to claim refund of service tax paid by us under mistake of law, which has not been collected from tenant. After ascertaining the position in this regard we shall submit application for refund of such tax wrongly paid.
In case there is any prescribed form of application for cancellation of registration and refund of tax paid under mistake of law, kindly provide us the same and allow time to submit the same.
For……. (Service tax assessee.)
By: C.A. DEV KUMAR KOTHARI - May 23, 2009
Discussions to this article
As this provision make ultra virus to the Act, so whether refund is entiled for entire period starting from the day on which such provision inserted. What would be the time limit for filing the refund claims with The Central Excise Department.
As per the Delhi High Court judgement, the service tax assessee may not surrendere service tax registration certificate, since, there is no any amendment till date, in the said section. At this stage, Serivce tax assessee may submit the letter to the Range Superintendant that we stop the collecting of service tax as per the Delhi High Court judgment and same letter has to be issue to the tenants after arrangement of commercial arrangement.
i dont agree with the view of the writer as it is incorrect to say that the delhi high court has held the said section ultra vires . the high court has simply held that merely letting out of imovvable property does not add any value to the the letting out of property and service tax being a value added tax , therefore cannot be levied on such letting out of property . therefore if there is only letting out of property than only shelter can be taked behind this judgement . if some other services are also provided in addition to merely letting out of property than the ratio of delhi high court's judgementwill sqarely apply .however , this is my opinion people may differ.
As per the Delhi high court judgement, there is no need to pay service tax on Rent.
If we have already paid rent inclusive service tax for April 09 & May.09.
whether we can pay Rent excluding service tax to owners of the premises w.e.f.01.06.2009
Whether we have to send copy of above judgement to them.
Can we recover the service tax paid on rent for April.09 & May.09
Further we are collecting service tax on rent received till 31 st May 2009
Can we stop collecting service tax on rent .
The renting of immovable property was made liable to service tax on 01-06-2007 and the same was declared ultra vires by the judgement of the Hon'ble High Court of Delhi dated 18-04-09. The judgement does not make it ultra vires from the date of judgement but ab initio . i.e. from the date it was introduced i.e 01-06-07. Therefore the service tax collected by the department is liable to be refunded.
CS, FCA, ISA(ICAI)