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.
