The government's move to bring back service tax on lease rentals could become a bone of contention between retailers and mall developers. Though developers are liable to pay such a tax, it is most likely, barring a few cases, to land on the laps of retailers, say tax experts.

The new Budget proposal could shave off around 1.5 per cent of retailers' net profit or 10 to 15 per cent of their total sales, if the tax incidence is on them. They are, therefore, seeking its rollback.

Also Read   Related Stories News Now - Retailers to continue with high sales - Pantaloon same-store sales in lifestyle segment up 11% - FinMin to give Rs 12,000 cr in cash to fuel retailers - Shoppers Stop may raise up to Rs 350 cr through QIP - OilMin seeks Rs 30,000 cr bonds for fuel retailers - Global tie-ups, private labels to be buzzwords in retail this year

Also Read   Related Stories News Now - Markets end flat - SAIL to add 5 mn tonne capacity in FY13 - NHPC FY12 net up 28% at Rs 2,772 cr - Aarti Industries Q4 up nearly 27% at Rs 28.24 crore - BPCL posts four-fold jump in Q4 net at Rs 3,963 cr More

“There is no other way left than fighting it out. We have to take it up with the ministry. We are also looking at all the ways and means to reduce its impact, such as sharing the tax with developers," says Govind Shrikhande, chief executive of Shoppers Stop.

“A lot of retailers can turn sick companies if such a tax is imposed,” says Kumar Rajgopalan, chief executive of the Retailers Association of India.

Many retailers are also talking about a burden-sharing mechanism with mall developers, an idea which developers are not keen on. "How can we share the taxes? We have not amortised the costs,'' said Vikas Oberoi, managing director of Oberoi Realty, which runs a mall in the Goregaon area of Mumbai.

Shrikhande of Shoppers Stop believes the issue would prevail till the Goods and Services Tax is implemented, as it will allow them to set off service tax on rentals against other items.

What has raised the heckles of retailers is the government's attempt to bring back the proposal even as the issue was being fought in the courts. Last year, the Delhi High Court ruled that renting of commercial space does not constitute a service. The central government has taken the issue to the Supreme Court.

New Ipad Application :Business Standard's all new IPad App Click here to download for free Other Stories      - Markets end flat - SAIL to add 5 mn tonne capacity in FY13 - NHPC FY12 net up 28% at Rs 2,772 cr - Aarti Industries Q4 up nearly 27% at Rs 28.24 crore - BPCL posts four-fold jump in Q4 net at Rs 3,963 cr

Tags : retailers | Shoppers Stop   Read Business news in  Advertisements -  Journey on, We are by Your Side. Click here to know more -  2 Lac Apartments, 1 Lac House / Plots. Click here -  Benefits Upto Rs. 2.36 Lakhs on the Fully Loaded TJet Petrol. -  The Best Seller is Also the No. 1 in Mileage. Click here -  Watch The Film Here. Click here to know more.. -  Leader in Passenger Car & Automobile Tyres. Click here -  1 billion in saving for Unilever without any tangles. -  A Brand New Server at a Price That Fits Your Budget. Click here -  Learn How One City is Running on FOOD SCRAPS. -  One Partnership Endless Possibilities. Click here to know more -  Helping doctors detect diseases earlier, saving costs & extending lives. -  36 Lakhs can get you a pool of Luxuries. Click here -  Which is the best plan for your daughter -  Check out the TRUE COLOURS of your Stocks, Now for FREE! -  One of the leading business schools in the world.Know More