Rents on commercial properties and six other services will go up from Friday with the coming into effect of service tax levied by the government in this budget.

The service tax of 12.36%, including 3% education cess, will apply on rents of all properties used for business and commerce with effect from June 1. In addition to renting of immovable property, service tax will also come into effect on six other services.

These include telecom service; mining of mineral, oil or gas; works contract; development and supply of content; asset management; and design services.

The first instalment of service tax will have to be paid by July 5. 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.
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  • Implication of this move..

    Is this move "drive" business to "own" the commercial space and at a time when property prices are declining?

    Actually more & more business are now looking at Real Estate acquisitions to increase their valuation given the fair amount of liquidity possible, thanks to the agents and the bull market. If this happens at mass scale (which is highly unlikely), more that could be invested in business to grow the business will get diverted to "real estate" acquisitions, impacting the potential business growth and in longer turn our economy.

    So the key question: Is this service tax a short term revenue collection exercises of government, that can eventually have an impact on growth of companies and hence the Indian economy? Will be great to know others views?
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