Renting of immovable properties for use in commerce or business will be leviable to service tax with effect from June 1, 2007.
However, property tax paid on immovable property is specifically excluded from the levy of service tax by way of an exemption notification.
Works Contract Service will also be leviable to service tax with effect from June 1, 2007. However, an optional Composition Scheme for payment of service tax on Works Contract Service has been notified.
Under this Scheme, provider of Works Contract Service is given the option to pay service tax at a flat rate of 2 per cent of the total value of the contract instead of paying service tax at the standard rate. Certain conditions are prescribed to avail the optional Composition Scheme.
Section 65 defines taxable services and various terms used in relation to taxable services. Section 66 is the charging section and provides for levy of service tax on taxable services. These two sections have been amended in the Finance Act, 2007 to be effective from June 1, 2007.
The goverment also effected amendment to Rules relating to service tax.
In view of the merger of various telecommunication related taxable services into 'telecommunication service,' notification no.
36/2004-Service Tax dated December 31,2004, and Rule 2(1)(d)(i) of the Service Tax Rules, 1994 have been amended so as to substitute the reference to various telecommunication related taxable services.
These are telephone connection, pager, leased circuit, ommunication through telegraph, communication through telex and facsimile communication, with the merged 'telecommunication service.' Export of Services Rules, 2005 and the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 have been amended so as to categorise the newly specified taxable services under Rule 3.
Exemption from service tax: Notification No.24/2007-Service Tax, exempts taxable service provided by any person in relation to renting of immovable property from service tax equivalent to service tax payable on the amount of property tax, actually paid by the service provider to the local authority. In other words, service tax is payable on the rental amount received less the actual amount of property tax paid.
''There may be a situation where property tax is paid after the payment of service tax on the rental. As a result, deduction of property tax paid from rental could not be availed of at the time of payment of service tax. In such cases, Rule 4C of the Service Tax Rules, 1994 provides self-adjustment of excess service tax paid without any limit,'' an official release said here.
Commercial or industrial construction service, and services provided in relation to the execution of works contract, provided in relation to construction of a port or other port has been exempted.
However, services such as completion and finishing, repair, alteration, renovation, restoration, maintenance or repair provided in relation to existing port or other port shall be outside the scope of this exemption, hence, leviable to service tax.
Optional Composition Scheme for Works Contract: Rule 2A of Service Tax (Determination of Value) Rules, 2006 [Notification No.29/2007-Service Tax] provides for valuation of services provided in relation to the execution of a works contract [section 65(105) (zzzza)].
As a trade facilitation measure and also for ease of administrative convenience, the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 has been notified vide notification No.32/2007-Service Tax, whereby the service provider has been given an option to pay service tax equivalent to 2 per cent of the total value of the works contract instead of paying service tax at the rate specified in section 66.