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Under Finance Act are there any decisions that Service Tax can be passed on to the tenant/licensee?

In India Service Tax is made applicable to renting immoveable properties from 01.06.2007. The license agreements which are signed / concluded before the imposition did not contemplate for payment of service tax. The Finance Act now casts liability for payment of service tax on the Landlord or the Licensor. If in the concluded agreements the tenants or the licensee have not agreed to bear the service tax and refuses to pay it casts additional burden on the Licensor/ Landlord. While introducing the new provision the concluded contracts are not taken into account. There is no source for the landlord to pass on the service tax to the tenant whilst avery other service provider e.g. Telecommunication (Govt., Semi Govt. and Private), Hotels, Airliners etc. pass on the tax to the end users.

Public Comments

1. It is always very important to properly draft an agreement. You should always mention in the draft that any taxes, if applicable at any time in the future shall be applicable as and when they commence As of now you can definitely amend your agreement and I dont think why the tenant can refuse as this provision has come into force subsequent to the agreement