CA Preeti Parihar, Manish Vyas
Service tax on “Renting of immovable property” service was introduced w.e.f. 1.6.2007. That time the language of charging Section 65(105)(zzzz) to the Finance Act, 1994 suggested that taxable service in this case would be service provided “in relation to” renting of immovable property. Thus, at that time the services provided in relation renting of immovable property were chargeable to service tax. Renting in itself was not chargeable to service tax.
Later on, after huge claws of litigation, Government amended this Section retrospectively in the Finance Act, 2010. Now, service tax was specifically levied on the “renting of immovable property service”. As such, this amendment brought the renting per se under the net of service tax; that too, retrospectively since levy, irrespective of anything contained in any judgment, decree or order of any court, tribunal or other authority.
Even after the retrospective amendment, litigation continued and Delhi high Court has granted stay from recovery of Service Tax in respect of renting of immovable property service in the case of Home Solutions Retails Ltd Vs UoI [2010–TIOL–341–HC–DEL–ST]. It was held that renting of immovable property by itself cannot be regarded as a service. The recovery of service tax thereupon was stayed by the hon’ble High Court.
Trent Limited & Future Value Retail Ltd. challenged the validity of the retrospective amendment brought by the Finance Act, 2010. The Andhra Pradesh High Court has stayed the recovery of service tax for the period June 1, 2007 to March 31, 2010 as decided in Trent Ltd. v. Union of India and Others [2010-TIOL-402-HC-AP-ST]. But the verdicts of hon’ble Andhra Pradesh High Court that service tax is not leviable for the period from 1.6.2007 to 1.4.2010.
Further, Delhi High court in the case of Home solutions Retail vs UOI has observed that the government should examine about the waiver of penalty due to non-payment of service tax in this matter. Subsequently, in the case of Retailers Association of India vs UOI, hon’ble Supreme Court has directed the litigants to pay 50% of the arrears within six months in three equal installments. For balance 50%, it was directed to furnish solvent surety at the satisfaction of the jurisdictional commissioner.
Section 80A introduced by Budget, 2012-
In the above background, the recent Budget has introduced a Section 80A for waiver of penalty subject to following conditions –
- Service tax due on renting of immovable property service is paid within a period of six month along with interest.
- The amount of service tax due will be as on 6.3.2012.
Thus, if the service tax due as on 6.3.2012 is paid within six months, the penalty will be waived. However, those who don’t avail this benefit, this Section will be treated as non-existent for them.
Right now, the constitutional validity of Renting of immovable property service is pending before the Hon’ble Supreme Court in the case of M/s Retailers Association of India v/s UOI in Civil Appeal No. 8390 of 2011 and in the case of Home Solutions Retail (India) Ltd v/s UoI in Special Leave Civil Appeal No. 27636/2011. But before the Apex Court decided this issue, government is once again ready to convince the providers of renting service to pay the service tax and availment the benefit of penalty waiver. Payment of the service tax on renting of immovable property service means they have accepted the levy. It seems government want to trap the renting service providers in the other way – this is Section 80A.