Flats can come under service tax

CHATROOM

Service provided for renting of an apartment for use in business comes under the service tax net.

We are a small-scale unit working under notification no.08/2003. We pay the full excise duty right from the first clearance and avail Cenvat credit on inputs.

Further to your advice, published in Business Standard on 23rd March, 2007, we are now selling material to a unit located in an SEZ, dispatched against ARE-1, in addition to our domestic sales. We do not export to foreign countries.

For sales to the SEZ, which are small lots of say 500 kg each at a time, two-three times in a month, the excise department is advising us to obtain permission from the commissioner for "factory stuffing" of these consignments. Please advise if it is required as this entails a long procedure.

Para 7 of the CBEC Circular no. 29/2006-Cus. dated December 27, 2006, says that clearance of goods at the place of dispatch, i.e., at the factory or warehouse, may be at the option of the exporter (DTA Supplier), either "under examination and sealing of goods by the central excise officer" or "under self-sealing and self-examination", as is applicable in the case of export of goods under Rule 18 or 19 of the Central Excise Rules, 2002. So, the option is very much that of the manufacturer.

In my opinion, you can very well clear the goods under ARE-1 under self-removal procedure and offer the goods for examination at the SEZ customs station. Regarding the factory stuffing permission, it is not necessarily a long procedure and once it is obtained by a manufacturer, it remains valid for all time to come, unless there are strong reasons to revoke the same.

I have let out an office premises (a commercial office space) in Mumbai for Rs 11,500 per month. I don't have any other rental income from any other property. Please inform:

If the service tax shall be payable?

If yes, is the onus of depositing this on the tenant or the landlord?
I am not depositing it presuming that as the total services' revenue is less than Rs 8 lakhs per annum this is exempted.

Firstly, you may note that it is the service provided in relation to renting of an immovable property for use in the course or furtherance of business or commerce that comes under the service tax net, and the liability to pay service tax in such cases is on the service provider and not on the service receiver. The notification no. 6/2005-S.T. dated March 1, 2005, (as amended by notification no.4/2007-S.T. dated March 1, 2007) covers the exemption for small service providers up to aggregate value not exceeding Rs 800,000.

It means the sum total of first consecutive payments received during a financial year towards the gross amount charged by you for taxable services till the aggregate amount of such payments is equal to Rs 800,000 but does not include payments received towards such gross amount which is exempt from the whole of service tax leviable thereon under Section 66 of the Finance Act, 1994, or under any other notification.

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