| The imposition of service tax on rentals from commercial establishments, announced in the Union Budget recently, is causing consternation amongst the landlord-tenant community. The initiative is bound to squeeze the margins of small and medium retail traders as there will be no opportunity to offset the taxes against output taxes as they cannot be offset against the State value added tax, according to industry chamber FICCI.
With the recent spurt in rentals, this would also have an inflationary impact of a very wide nature, particularly affecting such retailers.
The chamber has, therefore, suggested that the Government keep the imposition of tax in abeyance and constitute a committee with representatives from both landlords and the tenants to look into various dimensions of this aspect.
The chamber has argued that where the landlord is not able to recover the service tax from the tenant, it should be provided that it would be deductible as other property-related taxes in the computation of rental income.
The predicament of the small retail trader is bound to be faced by a large section of companies in the IT and ITES sectors, says the chamber and points out that the appropriateness of a tax should be evaluated in the Indian context as other countries do not have traders of the sort that exist in India.
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