I own a commercial property which I wish to lease out on rent. Recently, the Delhi High Court struck down the levy of service tax on renting of commercial immovable property. However, the recent Union Budget has amended the definition of the taxable service of ?renting of immovable property? to include the activity of renting itself. Please clarify.
Yes, the definition of the taxable service of ?renting of immovable property? has been amended to include the activity of renting property as well as any service in relation to such renting in the tax net. The amendment shall be made effective retrospectively from June 1, 2007 (ie, the date when renting of immovable property service was introduced). Therefore, service tax would be levied on the renting of commercial property by you.
We currently sponsor a major domestic tennis tournament. We understand that sponsorship of sports events is taxable under the service tax law. Is this correct?
The current Finance Bill proposes to include sponsorship of sports events as liable to service tax. However, this shall be effective only from a date to be notified after the Finance Bill is enacted. Hence, if you are sponsoring a tournament currently, service tax will not be applicable?though it shall be once the levy is effective in future.
We want to provide charter services for international flights which are not scheduled flights. Will service tax apply?
The service of international air travel of passengers by airlines in premium classes (ie non-economy) in scheduled flights is within the ambit of service tax. In case of non-scheduled flights, all classes of travel are subject to service tax. As you are providing non-scheduled chartered international flights, service tax shall apply on all ticket sales.
I intend to purchase a residential property. However, I am unsure of the additional cost of service tax that will be charged by the builder/developer on the additional services provided. Please advise.
After the enactment of the Finance Bill, special services provided by a builder/developer to buyers shall be subject to service tax. Such additional/special services could be preferential location charges, common lighting and roads, power back-ups and maintenance of parks and pipelines, to name a few. However, charges for providing parking space, development charges paid to the government or local bodies and services provided by residents associations shall not be covered under the category. Thus, the builder should not charge service tax on these additional services.
We are a unit engaged in slitting paper. We pay excise duty after claiming credit of the input credit. However, recently, excise officers have declared our activity ?as not amounting to manufacture?. In addition, they have issued a show-cause notice demanding reversal of input credit availed till date. Please advise us.
The central excise authorities have issued a circular stating that in cases similar to yours, the assessee shall not be required to reverse the input credit availed. The department, vide the circular, has clarified that if a certain activity was considered as ?manufacture? by the assessee and duty paid and credit utilised; the officers shall have to inform the assessee that the activity is a process not amounting to manufacture. Upon receipt of such information, the assessee shall approach the central government for regularisation of the credit availed and may stop collecting and paying excise duty.
Disclaimer: Respondents are senior tax professionals at Ernst & Young. The replies do not constitute professional advice, but are based on interpretation of facts available in readers? queries to the professionals. Neither Ernst & Young nor this publication is liable for any action taken on the basis of these replies