Renting immovable property for business is taxable

CHATROOM

Maintenance services are also separately covered under the service tax net.

We have imported certain materials supplied free of charge by the foreign buyer under the jobbing notification no. 32/97 dated 1.4.97. At the time of import, we had furnished a bond to the Central Excise Authorities and obtained a procurement certificate in Annexure III but the customs also insisted on a bond and we furnished the same and got the clearance duty free. Now, we have to export the finished products and we want guidance on the export procedure and how to discharge two bonds relating to same import. Can you please help?

The jobbing notification no. 32/97 requires you to follow the procedure given in Customs (Import of goods at concessional rate of duty for manufacture of excisable goods) Rules 1996. The CBEC Circular no. 46/96 explains the procedures in detail and prescribes the forms for registration, bond etc. The said notification, rules or the circular do not require you to furnish a bond to the customs. You have to furnish the bond only to the jurisdictional Central Excise authorities. In my opinion, the customs bond is taken without due authority and is of no consequence.

So, you may export the goods by following the same excise procedures that you follow or any other exports. At the customs, you may furnish a free shipping bill indicating the notification no. 32/97 to show that exports are against the duty free imports made earlier. You may submit the shipping bill to your excise authorities to evidence exports and also obtain a bank realisation certificate and submit the same to evidence fulfilment of 10 per cent value addition condition in the notification. Simultaneously, you may submit copies of the documents to the customs. These documents ought to be enough to meet the requirements of the authorities to release your bond.

Renting of property for commercial use is a taxable service now. We are billing separately for rent and for renting furniture and fixtures kept in the same premises and also for maintenance charges. We have made the lease deed also accordingly. Can we pay service tax only for the component of rent for the premises?

As per section 65 (105) of Finance Act, 1994, services provided or to be provided in relation to renting immovable property for use in business or commerce is a taxable service. The Supreme Court, in the case of 'Doypack Systems [1988 (36) ELT 201 (S.C.)], has held that the expression 'in relation to' is a very broad expression. Moreover even the Section 67 (ii) of the Finance Act, 1994 relating to valuation considers money value of any consideration (where any service is provided for any consideration) as part of gross value of taxable service. Further maintenance services are also separately covered under the service tax net.

Keeping in mind the provisions of the valuation as well as the definition of the said taxable service, I am of the view that you cannot escape the service tax liability on the entire receipts.

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