THE Delhi High Court has ruled that commercial renting of premises will not attract service tax, in a move that will cheer India Inc fighting a slowdown but leave the central government about Rs 8,000 crore poorer every year.
The Centre will challenge the order in the Supreme Court, said a government official who did not wish to be identified.
Renting of immovable property for use in the course or furtherance of business cannot be regarded a service, and, therefore, can't be taxed, the court ruled while disposing of petitions by retailers such as Lifestyle, Shopper's Stop Home Solution and Barista Coffee.
The order comes as a major relief to realtors and all companies operating from rented space, particularly retailers and call centres. "The high court order is a welcome one for the business and shall reduce the input costs in these tough times," Ernst & Young associate director Bipin Sapra said.
It also means a major revenue loss for the government, which collects over Rs 8,000 crore annually as tax on renting services, or more than one-tenth of its service tax net.
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