Concept of Service Tax on Renting (renting of residential dwelling for use as residence)

SERVICE TAX - ON RENTING

Section 65B(44) of the Finance Act 1994, Service means any activity carried out by a person for another for consideration and includes a declared servicebut shall not include:

By virtue of Section 66E of the Finance Act, 1994, Declared service include the “Renting of Immovable property”

Under Section 66 D of the Act, S.No. (m) of  Negative list(Non taxable service) are as under:-

Service by way of renting of residential dwelling for use as residence

Service by way of renting of residential dwelling would fall within the ambit of negative list only it the residence dwelling is used for the purpose of residence.

Residential dwelling does not include hotel,motel, inn, guest house, camp-site, lodge, house boat, or like places meant for temporary stay. As per normal trade parlance is any residential accomodation.

It is also an important point to discuss here that if residential dwelling is used in the course or furtherance of business or commerce, then the benefit of this clause can not be availed.

From the above it is clear if immovable property is given on rent for the purpose other than residential is taxable.

Exemption under notification No. 25/2012-S.T 20.06.2012

Sr. 18     Service by way of renting of a hotel,inn, guest house, club, camp-site or other commercial places meant for residential or lodging purposes, having declared tariff of a room below rupees one thousand per day or equivalent.

Conditions are to be satisfied to avail the exmption:-

·       Service are provided by way of renting of a hotel, inn, guest house, club, campsite or other commercial place;

·         Such renting shall be meant for residential or lodging purposes; and

·         Declared tariff or a room shall be below rupee one thousand per day or equivalent.

If declared tariff exceeds Rs.1000/- per day, then as per Sr. No. 6 of Notification No.26/2012, Service tax is required to be paid on 60% of the value subjected to the condition that CENVAT Credit on inputs and capital goods used for providing the taxable service has not been taken under the CCR 2004.

Liablility under Reverse Charge

Wherever the service provider is located outside the taxable territory but the servce is being provided in taxable territory, the tax shall be payable by service receiver.

CENVAT Credit on Service tax paid for Renting of hotels,inns, guest house, clubs, campsits or other commercial places meant for residential or lodging purpose.

·         If Such Service is used for Personal Use                 CCR is not allowed

·          If Such Service is used for Employee Benefit          CCR is not Allowed

·         If Such service is used for providing taxable             CCR is allowed

Service