We have taken an office on lease in Delhi. We understand that a stay has been granted by the Delhi High Court on the levy of service tax on renting of immovable property. On that basis, our landlord has not been charging service tax on us. However, because of a recent change in the service tax law, the landlord now asks us to pay service tax even for the past periods. Please let us know whether we should pay the tax or not.
The Delhi High Court, in the case of Home Solutions Ltd vs Union of India, has held that the levy of service tax on renting of immovable property to be outside the scope of the Finance Act (and that only services in connection with such renting of property would be liable to service tax). The tax authorities filed a special leave petition against the order in the Supreme Court, which is currently pending hearing.
Thereafter, the Finance Act 2010 has amended the definition of ?renting of immovable property service? to include within the service tax net the activity of renting of commercial immovable property as well as any service relating to such renting. The amendment has been brought retrospectively from June 1, 2007 (ie. the date when renting of immovable property service was introduced).
Subsequent to the amendment, a writ petition was filed before the Delhi High Court by Home Solutions Ltd challenging the retrospective amendment. The high court granted a stay on the recovery of service tax on the activity of renting (since the court had earlier concluded that renting of immovable property by itself cannot be regarded as a service).
Further, the Andhra Pradesh High Court, in a writ petition filed by Trent India, has also stayed the retrospective levy of the service tax on renting of immovable property.
Given the above facts, it is advisable to request the landlord not to recover the service tax on renting of immovable property for the past periods until the above matters are disposed of by the courts.
We are a Delhi-based trading organisation. We have been paying service tax on transport of goods by road as a service recipient. We received a notice from the service tax department regarding a service tax audit. Can we waive off this audit since we do not provide any services?
The service tax law provides that central excise officers (authorised by the commissioner) have access to a service tax payer?s premises for the purpose of carrying out scrutiny, verification and checks. Further, it is mandatory for the assessee to make available its records for inspection and examination by such officers or audit parties.
Therefore, once you are registered for service tax, you would be mandatorily required to comply with the service tax audit and provide the information/documents requested by the tax authorities. You cannot waive off such an audit. We would also like to highlight that other entities that are engaged in trading activities have also been subject to audit as they are registered for service tax.
?The replies do not constitute professional advice. Neither Ernst & Young nor FE is liable for any action taken on the basis of these replies