Pradeep. K Mittal Member Central Council of The Institute of Company Secretaries of India, New Delhi Advocate Delhi High Court, Delhi RENTING OF IMMOVABLE PROPERTY

The definition of renting of immovable property has been given under clause (90a) of section 65. that is: “renting of immovable property” includes renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce but does not include-

(i) renting of immovable property by a religious body or to a religious body: or (ii) renting of immovable property to an educational body, imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching centre;

Explanation 1- For the purposes of this clause, “ for use in the course or furtherance of business or commerce” includes use of immovable property as factories, office buildings, warehouses, theatres, exhibition halls and multiple use buildings.

Explanation 2- For the removal of doubts, it is hereby declared that for the purpose of this clause “ renting of immovable property” includes allowing or permitting the use of the space in an immovable property, irrespective of the transfer of possession or control of the said immovable property.” {Section 65 (90a)}

Renting of immovable property in the following cases is also excluded from the scope of levy of service tax, namely:- i) renting of immovable property by a religious body; Renting of immovable property excluded from levy of service tax.

renting of immovable property to a religious body; renting of immovable property to a religious body; renting of immovable property to an educational body; other than commercial training or coaching centre. Commercial coaching or training centre has been defined U/s 65 (27). renting of immovable property to an educational body; other than commercial training or coaching centre. Commercial coaching or training centre has been defined U/s 65 (27).

Immovable properties excluded from the scope of this service are : (i)residential properties (ii)residential accommodation such as hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities. Immovable property excluded;

(iii)Vacant land solely used for agriculture, acqua culture, farming, forestry, animal husbandry, mining purposes; (iii)Vacant land solely used for agriculture, acqua culture, farming, forestry, animal husbandry, mining purposes; (iv)Vacant land, whether or not having facilities clearly incidental to the use of such vacant land (v)Land used for educational, sports, circus, entertainment and parking purposes

Where renting of immovable property is a single composite contract involving part of property for use in commerce or business and part of it for residential/ accommodation purposes, Renting of immovable property partly for residential and partly for commercial purposes;

for the purpose of levy of service tax, entire property under the contract shall be treated as property for use in commerce or business and accordingly the total value of the contract shall be the taxable value. In view of the author, this provision is appears to be unreasonable hence one can challenge in the court about its validity. for the purpose of levy of service tax, entire property under the contract shall be treated as property for use in commerce or business and accordingly the total value of the contract shall be the taxable value. In view of the author, this provision is appears to be unreasonable hence one can challenge in the court about its validity.

Under the law, renting of immovable property used for furtherance of business, it is liable to be service tax. It does not matter whether the Government or Private parties rent it. However, the Government through instructions No.137/280/2007-CX.4, dated (appended as Annexure-IV) has clarify that “having central excise office does not fall under furtherance of business and commerce as it is an activity of performing statutory function by a public authority and not an activity of business or commerce. Therefore, it is not liable to pay service tax under taxable service category of “renting of immovable property”. Whether the letting out property for the Government offices is the taxable services?

Service Tax is liable to be paid by any person providing services in relation to renting or immovable property. The service tax in general liable to be paid by the service provider except in some cases where it has been prescribed that it would be paid by the service receiver. The relevant provisions are given U/s 68 (1) of the Finance Act,1994 read with rule 6 of Service Tax Rules, Therefore, landlord being service provider is liable to pay service tax in the credit of government account after taking registration. Who is liable to pay service tax?

Yes, a landlord has right to recover the tax from tenant because it is indirect tax refer :All India Tax Payers Welfare Association Vs. UOI 2006 (4) STR 14 (Mad); Whether landlord can recover the service tax from tenant?

However, as per section 67 (2), if the service tax is not separately collected then rent so received will deemed to be inclusive of service tax ( cum duty), and service tax has to be computed accordingly. Therefore, it will all depend upon the agreement between the landlord and the tenant whether landlord would be able to recover service tax from its tenant. In case, there is no term is a contract to recover tax from the tenant, still landlord shall be liable to pay service tax.

The Government w.e.f , has exempted from levy of service tax equivalent to service tax payable on the amount of property tax, actually paid by the service provider to the local authorities/bodies. In other words, service tax is payable on the rental amount received less the actual amount of property tax paid. Vide notification No.24/2007-ST, dated , (appended as Annexure-I). Deduction of property tax paid from value of taxable service?

However, any amount such as interest, penalty paid to the local authorities by the service provider on account of delayed payment of property tax or any other reasons cannot be treated as property tax for the purpose of this exemption and hence, deduction of such amount from the gross amount charged shall not be allowed. However, any amount such as interest, penalty paid to the local authorities by the service provider on account of delayed payment of property tax or any other reasons cannot be treated as property tax for the purpose of this exemption and hence, deduction of such amount from the gross amount charged shall not be allowed.

Yes, the exemption of Rs.10 Lacs shall be available to those assesses which satisfied all the conditions mentioned in Notification No.6/2005 – ST, , therefore, if there is no other receipt from any other taxable services, then rent received first up to 10 lacs shall be eligible for exemption, Whether exemption shall be available for the first 10 lakhs in first year?

however, next year this exemption shall not be available, if total rent exceed 10 lacs in the year , For instance, if rent receipt (presuming no other receipts from any other taxable services), is more than 10 lacs from 1st April,2008 to 31st March,2009, then the person has option to opt for exemption under the said exemption and pay tax after the receipt of first 10 lacs rent.

Thank You