One of the most inequitable provisions in this year's Budget is the levy of service tax on rent payable for lease of commercial immovable property. This provision comes into force from June 1, 2007. The landlord now has to pay property tax to the local municipality, income-tax on the rental income, and the tenant will now have to pay service tax on the rent paid to the landlord. There is no service tax on immovable property used for religious and educational purposes.

It has also been made clear that service tax is payable for rents paid for factories, warehouses, theatres and exhibition halls. With service tax plus educational cess at 12.36 per cent, every tenant will now pay service tax equivalent to six weeks of rent.