Renting of Immoveable Property by Religious Trust, Service Tax

[Aliasgar Tambawala]

1.      Where the Querist (Religious Trust) is the Landlord of a property and shops in that property is rented to tenants under the provisions of the Maharashtra Rent Control Act :

 a)     Whether Service Tax will be applicable on Shop Rent?

 b)     If Yes, then whether Service Tax shall be applicable on the Basic Rent component or the Total Rent (comprising of Property Tax and Repair Cess also)?

 Does

 i.   Deduction of taxes includes Property tax and Repair Cess? Any other taxes that are covered?

 ii.   it mean that we need to ascertain the taxes for each shop? What if such information is not available viz. whether Property Tax and Repair Cess in respect of each shop premises needs to ascertained?

 iii.   As per Notification no. 24/2007 dated 22/05/2007, “wherever the period for which the tax paid is different from the period for which the service tax is paid, tax proportionate to the period for which service tax is paid shall be calculated and the amount so calculated shall be excluded from the gross amount charged for renting of the immoveable property for the said period”

In this scenario, we would like to specify that generally Property Tax is paid 6 monthly at the end of the 6^th month (viz. Property Tax for the period April 2012 – September 2012 is generally paid at the end of September 2012) and Repair Cess is paid 6 monthly and the end of subsequent 6 month (viz. Repair Cess for the period April 2012 – September 2012 is generally paid at the end of March 2013). So if rent is received yearly in advance, then how do we take the deduction for taxes?

c)   Whether Service Tax will also be applicable on Maintenance charges recovered from the tenants of the Shop pertaining to common amenities provided viz. security, sweeper, electricity, water etc.?

Maintenance charges recovered from the tenants of the Shop pertaining to common amenities provided viz. security, sweeper, electricity, water etc. are basically in the nature of reimbursement of exps. Also generally there is excess / short recovery of such expenses.

 2.   As per clause 5 (a) of Exemption notification  no. 25/2012 dated 20.06.12, services by a person by way of Renting of precincts of a Religious Place meant for general public is exempt.

2.1   In this case if the Querist is earning License Fees by allowing Cell Tower Company to install their Shelter Cabinet on the terrace premises of Masjid premises (being managed by the Querist), will the same be exempt from Service Tax applicability being Renting of precincts of a Religious Place meant for general public?

As per clause 5(a) of Exemption notification  no. 25/2012 dated 20.06.12 – “Renting of precincts of a religious place meant for general public” is exempt.

3.  Whether Cenvat credit will be available to the Querist?

a)   Can any type of Cenvat Credit availed by the Querist be utilized for payment of service tax in respect of Renting of Immovable Property services provided by Querist or whether Cenvat credit of Service tax can be claimed ONLY on the input services directly related to renting of immoveable property?

 b)As per Board Circular No 98/01/2008-ST dated 04/01/2008, Input credit of service tax can be taken only if the output is a ‘service’ liable to service tax or a ‘goods’ liable to excise duty. Since immovable property is neither ‘service’ or ‘goods’ as referred to above,  whether input credit can be taken?

c)     If Cenvat credit is available than:

i.   Can excess credit if any, whether can be carried forward?

 ii.  When rent on immoveable property is received say yearly in advance and input credit is received on a monthly basis, how the set-off should be done to avail the maximum benefit of input credit?

 If Rent is received yearly in advance, then monthly cenvat credit of inputs will not be sufficient to set-off the service tax liability and we will tend to lose the cenvat credit of the balance 3 quarters. Can Cenvat credit of earlier quarters be considered?

4.    As per the provisions of Service Tax, the service tax has to be paid on “due or received basis” whichever is earlier. Does it mean that once rent is due, service tax has to be paid to the Statutory Authorities irrespective of the fact whether we collect the rent and service tax component from the tenant / lessee?

Here too there are 2 possibilities:

a)     Rent is received but service tax is not received from the Licensee or

b)     Neither Rent is received nor the service tax is received from the licensee.

In the light of the above, when would be service tax be payable in case of (a) and (b) above?

For instance Rent for the year June 2012 to May 2012 is received on 7/6/12 but service tax reimbursement on the above rent is not reimbursed by the Licensee upto 05/07/2012 and say that the service tax is paid / reimbursed by the Licensee on 4/8/12. In this scenario when shall the service tax be paid by the Licensor?

Or

For instance Rent for the year 2012-13 is not paid by the Licensee till March 2013 (due to some financial crunch and Leave and License Agreement provides for monthly payment of rent) and obviously the service tax on the said rent is also not paid/reimbursed by the Licensee. In this scenario is service tax payable by the Licensor? If yes, then by when?

 5.   In the case of the Querist Service tax is applicable on Renting of Immoveable Property from 01/07/2012, so if the Licensee has paid the Querist rent for the period May 2012 to April 2013 by 18/5/12. Than will service tax be applicable if rent is received before 01/07/12?

 If yes than shall the querist raise a service tax invoice on the Licensee for the period July 2012 to April 2013 on proportionate basis?

Posts / Replies

[MARIAPPAN GOVINDARAJAN]

Whether you have got clarified in this issue? If not please inform.

[Aliasgar Tambawala]

Clarification is still awaited.

[MARIAPPAN GOVINDARAJAN]

I shall analyze the case and revert to you.

[Aliasgar Tambawala]

Thanks and awaiting your feedback on the same.