Service Tax will be Charged on Rentals of Commercial Property, says FINMIN

March 30, 2007	(2 votes, average: 3.5 out of 5)  Loading ...
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Despite of strong protests from different sectors of India Inc, the finance ministry does not seem to change its stand of levying a service tax on renting of immovable property for commercial purposes.

Such property rentals are essential services and so should be brought under the service net tax. However, a final decision is still awaited for the amendments to the Finance Bill, which is likely to be tabled in the Parliament after the recess.

A service tax of about 12.36% will be levied on the rental of commercial property. The finmin is also thinking about increasing the scope of service tax to property leased for residential purpose. As such, there is no such proposal in the ministry’s pipeline.

Finance minister, P. Chidambaram has introduced service tax on rental of immovable property used for commercial purpose in Budget 2007-08. The proposal is not extended to the residential property, vacant land used for agriculture and similar purposes, and immovable property for educational or religious purposes.

The major sufferers will be corporates, multinationals, retail sector, restaurants, BPOs, IT companies, and multiplexes. Most of these companies especially BPOs take the property on rent to carry out their operations.

In addition, it’s natural for the property agents to feel anxious because of the proposed tax. For that reason, their protest is justified as they are of view that it would only lead to a further increase in rental prices.

There seems to be a common reason for protest from all quarters of life i.e. real estate boom, along with the lack of commercial space which has already pushed the rental rates to sky high. Service tax will be an additional burden.

News Published Under:   Real Estate India |