The tax department has issued service tax and GST notices to various Wakf boards for not paying tax on rent received from the properties used for non-religious and non-charitable purposes.
Out of the 30 Wakf boards in the country, only two Kerala State Wakf Board and Dawoodi Bohra Wakf, Mumbai have registered under the Goods and Services Tax (GST) regime.
“The Department has started sending show cause notices to the Wakf boards for default in the payment of erstwhile service tax which was required to be paid on rental income from the leasing of properties for commercial purpose. The same is applicable under GST.”
According to sources, Wakf boards collectively are the largest owner of the immovable property after defense and railways and the estimated tax revenue that could accrue to the exchequer could be around Rs 100 crore annually.
Although the income of the Wakf boards is exempt from Income Tax, it is not the case with regard to GST and the erstwhile service tax levy.
As per the service tax and GST laws, revenue generated from the leasing of properties by Wakf boards for commercial purposes are liable to be taxed.
Sources said that as per the established law, the tax has to be levied on income unless they are specifically exempt.
The exemption would be available on revenue generated from premises rented for specific charitable and religious purposes.
Wakf property refers to the permanent dedication of any movable or immovable property for any purpose recognized by the Muslim law as pious, religious or charitable.