Rent on commercial properties and cost of six services -- telecom, asset management, mining, oil and gas, works contract, development and supply of content -- will go up from Friday as service tax introduced in this year's budget comes into effect.
"The service tax of 12.36 per cent, including three per cent education cess, will apply on rents of all properties used for business and commerce with effect from June 1," Atul Gupta, former chairman of North India Regional Council of Institute of Cost and Works Accountants of India, said.
The first instalment of service tax will have to be paid by July 5. Gupta said the service tax would not apply on rents of residential
premises and properties rented for educational, agricultural and recreational purposes.
However, composite properties used for residential as well as commercial purposes will fall within the ambit of the service tax, he added.
The impact of service tax 'will be neutralised to some extent with the government allowing deduction of property tax from the rent for computing service tax,' said Diljeet Titus, senior partner of corporate law firm Titus and Co Advocates.
However, Titus said as the incidence of service tax would be passed on to the tenants, it could have implications on corporate bottom line, especially small and medium firms operating from rented premises.
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