Sign in Subscribe
Real estate industry

India Proposes Service Tax on Commercial Renting Agreements

Strategic Insights

— 1 min read

The Indian government has proposed to bring all commercial renting under the service tax, as announced by Finance Minister Pranab Mukherjee in the Union Budget 2010-11. This move aims to tax the rent collected from commercial tenants, with the owners being required to pay service tax on the collected amount. The proposal is set to apply retrospectively from June 2007 and will not exempt non-commercial housing or property leases.

Key Takeaways:

  • The Indian government has proposed to bring all commercial renting under the service tax, as announced by Finance Minister Pranab Mukherjee in the Union Budget 2010-11.
  • The move aims to tax the rent collected from commercial tenants, with the owners being required to pay service tax on the collected amount.
  • The proposal will apply retrospectively from June 2007, which means that service tax will be charged on commercial rentals for the past three years.
  • The service tax will not apply to non-commercial housing or property leases, as stated by Revenue Secretary Sunil Mitra.
  • The government is changing the definition of "renting of immovable property services" following the orders of the Delhi High Court, which held service tax on immovable property to be unconstitutional in April 2009.
  • The proposal is part of the government's efforts to expand the service tax base and increase revenue.
  • The Delhi High Court's ruling in April 2009 stated that service tax cannot be levied on immovable property as there is no value addition in the transfer of property.

Statistics:

  • Service tax will be charged on commercial rentals for the past three years, since June 2007.
  • The proposal will affect all commercial renting agreements or contracts between lessors and lessees.
  • According to the government, service tax will be payable on the rent collected from commercial tenants, with the owners being the ones responsible for paying the tax.

Sources:

  • "Proposal to bring all commercial renting under service tax". PTI, March 1, 2010.
  • "Union Budget 2010-11". Ministry of Finance, Government of India, March 2010.

Read more