Retailers confront service tax on rents

Mumbai, 9 July: Bombay High Court has admitted a petition that challenges leying of service tax on rents from immovable properties. This petition holds the potential to create a dent of at least a few hundred crores that govt. hopes to collect as service taxes this year. It has a target of Rs.50, 200 crore.The plea challenges levy by arguing that when a landlord rent out its property, it involves a ‘transfer or right’ and does not comprise a ‘service’ as defined by government.

Service tax of 12.24%was extended to the “service of renting out or leasing of immovable property in 2007-2008 budgets. Almost all commercial properties comes under this rule as residential properties and few other like religious bodies are exempted from this tax.. Since the taxis an indirect levy, landlords have started passing the burden to their lesses or tenants. The 1st installment of new tax became payable on July 5. Most of the tenants have not paid it up yet. Bodies like the retailers Association of India (RAI) along with Confederation of Real Estate Developers’ Association of India and Multiplex Association of India have moved towards the Bombay High Court with a writ appeal which was heard and admitted on Thursday by division bench consisting of Justice FI Rebello and RV More. The bench will give its final decision in the week beginning September 17. Arguing the matter on behalf of the petitioners, Rafiq Dada and Vikram Nanakani from economic Laws practice, said that leasing or renting out any premise creates and destroys rights. Hence such transactions can not be termed as services rendered by the landlord to a tenant. Therefore service tax should not be imposed on such dealing

By Saniya Mehra