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Renting of Immovable Property Service
Renting of Immovable Property Service

Declared Services Page

INTRODUCED: With Effect From 1st July 2012
 
Contents
Definition
Scope
Service Tax Exemption
Clarification
Relevant Service Tax Notification
Relevant Service Tax Circulars
 
 
DEFINITION:

Section 65B (41) defines "renting" as allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property

SCOPE
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Renting includes letting, leasing, licensing or other similar arrangement. The contract is for right-to-use an immovable property for a consideration. Immovable properties excluded from the scope of this service are

• Renting of vacant land, with or without a structure incidental to its use, relating to agriculture.

• Renting of residential dwelling for use as residence

• Renting out of any property by Reserve Bank of India

• Renting out of any property by a Government or a local authority to all non-business entity.

SERVICE TAX EXEMPTION

Notification No 25/2012 dated 20.06.2012, exempts;

• Renting of precincts of a religious place meant for general public.

• Renting of a hotel, inn, guest house, club, campsite or other commercial places meant for residential or lodging purposes, having declared tariff of a room below rupees one thousand per day or equivalent is exempt.

• Renting to an exempt educational institution

 
CLARIFICATION
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Would permitting usage of a property for a temporary purpose like conduct of a marriage or any other social function is taxable?

Yes. As per definition allowing or permitting usage of immovable property, without transferring possession of such property, is also renting of immovable property.

Would activities referred to in column 1 of a table below be chargeable to service tax?

Sr. No. Journey Taxability
1. Renting of property to an educational body Exempted if provided to an educational institution for the purpose of education which is exempt from the levy of service tax.
2. Renting of vacant land for animal husbandry or floriculture Not chargeable to service tax as it is covered in the negative list entry relating to agriculture
3. Permitting use of immoveable property for placing vending/dispensing machines Chargeable to service tax as permitting usage of space is covered in the definition of renting
4. Allowing erection of a communication tower on a building for consideration. Chargeable to service tax as permitting usage of space is covered in the definition of renting
5. Renting of land or building for entertainment or sports Chargeable to service tax as there is no specific exemption.
6. Renting of theatres by owners to film distributors (including under a profit-sharing arrangement) Chargeable to service tax as the arrangement amounts to renting of immovable property.

Whether hotels/restaurants/convention centres letting out their halls, rooms etc. for social, official or business functions or letting out of halls for cultural functions fall within the scope of this declared list service?

Halls, rooms etc. let out by hotels/restaurants for a consideration for organizing social, official or business functions or letting out of halls for cultural functions are covered within the scope of renting of immovable property and would be taxable if other elements of taxability are present.

Is renting of precincts of a religious place taxable?

No. However, exemption is available only if the place is meant for general public. General public is also defined in the mega notification 25/2012-ST as the body of people at large sufficiently defined by some common quality of public or impersonal nature.

I have taken on rent a piece of vacant land from its owner. The land will be used for providing the facility of vehicles parking on payment. What is my service tax liability?

You are not required to pay tax on providing the facility of vehicle parking to general public. However, if you are providing the facility of parking of vehicles to a car dealer, you are be required to pay tax as parking facility is not for general public. Moreover, land owner is liable to pay service tax on renting of his land to you.

If A house is given on rent one floor of which is to be used as residence and the other for housing a printing press, what would be taxability?

A house is given on rent one floor of which is to be used as residence and the other for housing a printing press. Such renting for two different purposes is not naturally bundled in the ordinary course of business. Therefore, if a single rent deed is executed it will be treated as a service comprising entirely of such service which attracts highest liability of service tax. In this case renting for use as residence is a negative list service while renting for non-residence use is chargeable to tax. Since the latter category attracts highest liability of service tax amongst the two services bundled together, the entire bundle would be treated as renting of commercial property.

Would the nature of renting transactions explained in column 1 of the table below be covered in this negative list entry?

1 2
If….. Then……
(i) a residential house taken on rent is used only or predominantly for commercial or non-residential use. the renting transaction is not covered in this negative list entry.
(ii) if a house is given on rent and the same is used as a hotel or a lodge the renting transaction is not covered in this negative list entry because the person taking it on rent is using it for a commercial purpose.
(iii) rooms in a hotel or a lodge are let out whether or not for temporary stay the renting transaction is not covered in this negative list entry because a hotel or a lodge is not a residential dwelling.
(iv) government department allots houses to its employees and charges a license fee such service would be covered in the negative list entry relating to services provided by government and hence non- taxable.
(v) furnished flats given on rent for temporary stay (a few days) such renting as residential dwelling for the bonafide use of a person or his family for a reasonable period shall be residential use; but if the same is given for a short stay for different persons over a period of time the same would be liable to tax.
RELEVANT SERVICE TAX NOTIFICATIONS:

   Notification No 25/2012 dated 20.06.2012 - Exemption Notification

RELEVANT SERVICE TAX CIRCULARS/INSTRUCTIONS/TRADE NOTICES::
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 Taxation of Services - An Education Guide dated 20.06.2012

 

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