EXEMPTION TO RENTING OF AN IMMOVABLE PROPERTY

[Dr. Sanjiv Agarwal]

Taxable service of renting of an immovable property, from so much of the service tax leviable thereon, as is in excess of the service tax calculated on a value which is equivalent to the gross amount charged for renting of such immovable property less taxes on such property, namely property tax levied and collected by local bodies. (Refer Notification No. 29/2012-ST dated 20.6.2012).

 Conditions for Exemption

This exemption is available subject to the following two conditions –

a) any amount such as interest, penalty paid to the local authority by the service provider on account of delayed payment of property tax or any other reasons shall not be treated as property tax for the purposes of deduction from the gross amount charged.

b) wherever the period for which property tax paid is different from the period for which service tax is paid or payable, property tax proportionate to the period for which service tax is paid or payable shall be calculated and the amount so calculated shall be excluded from the gross amount charged for renting of the immovable property for the said period, for the purposes of levy of service tax. taxmanagementindia.com

Illustration

The notification also explains the exemption by way of an example as under –

Property tax paid for April to September = Rs. 12,000/-

Rent received for April                          = Rs. 1, 00,000/-

Service tax payable for April = Rs. 98,000/- (1, 00,000 -12,000/6) * applicable rate of   service tax

It may be noted that renting of immovable property is a declared service under section 66E.

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Discussions to this article

[Shaikh Abdul Samad Ahmad]

Dear Sir,

Assessee has gross rent value for FY 2014-15 as ₹ 10,32,000/-. Property Tax amount is ₹ 2,00,000/-.

The Dept Official is not allowing the SSI Exemption. Is he correct, in my view, NO. We have discussed the Notif 29 & 33 of 2012 already. We need any case law or other reference.