Commercial rentals likely to head north

Finance Minister Pranab Mukherjee has proposed to amend the Finance Act 1994 to include renting of commercial property as a service. The said provision that brings renting of commercial space under the service tax net would be applicable with retrospective effect from June 1, 2007.

Finance Minister Pranab Mukherjee has proposed to amend the Finance Act 1994 to include renting of commercial property as a service. The said provision that brings renting of commercial space under the service tax net would be applicable with retrospective effect from June 1, 2007.

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The proposal is expected to increase commercial rentals. Retailers have always complained about high rentals, accounting for almost 8-15 per cent of the total operational cost. A service tax over and above this amount is lilely to hit them even harder.

“The proposed amendment could lead to a hike in rentals,” said Pranab Datta, vice chairman and managing director of real estate consultant company Knight Frank India.

Govind Shrikhande, president and CEO of Shopper’s Stop said the proposal could mean an extra burden of Rs 800 crore for the organised retail sector.