Advocate Santosh Kumar
Service tax provisions in case of Raising of Lumpsum Rent & Service tax Bills for 9 month is the hands of service provider & service receiver
Query
1. We are a practicing CA firm. We are operating from one rented premises, which belongs to Wife of one of the partner? The Partner’s wife recently raised the bill for rent of 9 months i.e. from 1st April 2012 to 31st December 2012 as one bill on 31.12.2012. No Payment towards the rent been made till 31st December 2012. Now the firm wants to take the credit of Service tax on Rent against its service tax liability for the quarter ending on 31.12.2012. Please suggest.
2. Will there be any problem to Partners wife who raised the bill 9 months after the renting of property. Do partners wife can show that Income accrued and arises in December 2012 and pay the service tax as liability as liability of December Quarter and show the rent from April , 2012 to December, 2012 as Income of Quarter ending on 31.12.2012?
Answer
Query 1
Is CENVAT Credit available?
Provision of CENVAT Credit:-
Rule 4(7) “The CENVAT credit in respect of input service shall be allowed, on or after the day on which the invoice, bill or, as the case may be, challan referred to in rule 9 is received:
[Opinion 1:- Considering and on the basis of the above mentioned part of the provision, I am of the opinion that you can take CENVAT credit of the bill for rent of 9 months i.e. from 1st April 2012 to 31st December 2012 raised in one bill on 31.12.2012. ]
Provided that in case of an input service where the service tax is paid on reverse charge by the recipient of the service, the CENVAT credit in respect of such input service shall be allowed on or after the day on which payment is made of the value of input service and the service tax paid or payable as indicated in invoice, bill or, as the case may be, challan referred to in rule 9:
[Opinion 2:- Since, for the bill issued against renting, you are not liable to pay service tax under reverse charge, this provision is not applicable to you]
Provided further that in case the payment of the value of input service and the service tax paid or payable as indicated in the invoice, bill or, as the case may be, challan referred to in rule 9, is not made within three months of the date of the invoice, bill or, as the case may be, challan, the manufacturer or the service provider who has taken credit on such input service, shall pay an amount equal to the CENVAT credit availed on such input service and in case the said payment is made, the manufacturer or output service provider, as the case may be, shall be entitled to take the credit of the amount equivalent to the CENVAT credit paid earlier subject to the other provisions of these rules:
[Opinion 3:- This part of sub-rule makes provision of reversal of CENVAT Credit taken on invoice (as mentioned in Opinion 1 supra) if payment of the value of input service (Renting in this case) and the service tax paid or payable as indicated in the invoice, bill, is not made within three months of the date of the invoice, bill. In this case You are required to pay entire amount of renting and service tax before 30th March, 2013.]
Query 2
Will there be any problem to Service Provider who has rented the premises, for raising the bill after 9 months. Can Service Provider show the Income accrued and arose in December and pay the service tax as liability of December Quarter and show the rent from April to December as Income of December quarter?
Provision of Service Tax
Rule 6 of Service Tax Rules, 1994 (Payment of Service Tax)
“Provided also that in case of individuals and partnership firms whose aggregate value of taxable services provided from one or more premises is fifty lakh rupees or less in the previous financial year, the service provider shall have the option to pay tax on taxable services provided or to be provided by him up to a total of rupees fifty lakhs in the current financial year, by the dates specified in this sub-rule with respect to the month or quarter, as the case may be, in which payment is received.”,
[W.e.f. 1st April, 2012, Notification No. 3/2012-ST dated 17th March, 2012]
Opinion:- it is apparent from the fact provided to me that service provider is individual. Rule 6, which has been reproduced herein above provides an option to individuals to pay service tax on RECEIPT Basis, if aggregate value of taxable services provided from one or more premises is fifty lakh rupees or less in the previous financial year.
Since in the present case, for the period 1st April to December, 12 only invoice is raised not payment is received therefore, no need to pay service tax until payment is received.
With regard to second query is it not voilating Rule 4A of service tax rules with regard to raising invoice within 30 days from the date of completion of service?
thanks for answering queries that are mostly asked to chartered accountants.
In case rent is payable as per Rent Agreement between the owner and the occupier, then service tax is chargeable and payable by the provider of service under rule 2(1)(f) reand with rule 6 of the Service Tax Rules, 1994.