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Service tax may mean rise in prices
June, 22nd 2007

Prepare to shell out more when you go shopping at a mall or department store, thanks to the ever-widening service tax net.

From June 1, a service tax of 12.36 per cent has been introduced on rent of Rs 8 lakh or more per annum from leased commercial properties. The landlord will, naturally, charge the new service tax to the tenant, who is likely to pass the burden down to his customers.

The move may affect customers in shopping malls and departmental stores. Shops in malls and departmental stores typically have areas ranging from 500 sq ft to 10,000 sq ft in a city where rent for commercial properties varies from Rs 100 to Rs 400 per sq ft per month.

Mumbai Service Tax Commissioner S J Singh said his department estimated additional revenue of Rs 300 to Rs 400 crore from the move. He said many landlords had already come forward to register with the department, while help had also been sought from the stamp duty office to get a list of properties.

But unlike landlords, who simply have to recover the additional amount from the shopkeepers and give a rent receipt that separately mentions the service tax, traders are opposing the move. Shopkeepers said the new burden would have to be passed on to customers, who  face an increase in the price of certain goods.

This is ridiculous, said Mohan Gurnani, president of the Federation of Associations of Maharashtra. Nobody will pay from his pocket. The shopkeepers are in business, not in charity, he said.

Calling the implementation of service tax unjustifiable, Ashok Patel, president of the Fort Merchants Welfare Association said shopkeepers in the city already pay about 40 types of licence fee and taxes, all of which are factored into the price of goods on sale.

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