In a judgment that has enriched the central government coffers by an estimated Rs 10,000 crore in the last three years, the Bombay high court on Thursday upheld the constitutional validity of service tax on commercial real estate transactions on renting of property.
A 12% service tax was introduced in the amended Finance Act, 2007. Dictating and delivering the judgment in the open court, Justice D Y Chandrachud held that the renting of land and building did comprise a “service” and that the Centre was entitled to levy a tax on it.
The judgment, viewed as landmark in legal circles, has recognized wide powers with the Centre to levy a service tax on transactions which have an element of service. The judgment thus resolved the power of the Centre to bring under the service tax umbrella un-enumerated services too.
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