Service tax on renting of immovable property

The activity of renting immovable properties for commercial use is taxable with effect from 1st June 2007.

What is Renting of immovable property

Renting of immovable property includes renting, letting, licensing or other similar arrangement of immovable property for use in the course of furtherance of business or commerce. “For the use of furtherance of business or commerce” includes use of immovable property as factories, office buildings, warehouses, theatres, exhibition halls and multiple use buildings.

Who are liable to pay service tax

Every person who is providing taxable services for more than Rs.1,000,000 in any financial year (from 1st April to 31sty March) is liable for tax. As service tax is an indirect tax so payer can collect the tax from the service recipient. In case immovable property the owner is the service provider and tenant is a service recipient. If the service provider is located in India, he is the person responsible for paying the service tax, irrespective of whether he has collected the service tax from the receiver. However where the service provider is located outside India and the service receiver is located in India, then the service receiver will treated as the service provider and service receiver is the person liable for paying service tax.

Properties are not liable for service tax

i. Renting of immovable property by a religious body or to a religious body
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 center.
iii. Land used for educational, sports, circus, entertainment and parking purpose and
iv. Building used solely for residential purpose and building used for accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities.

General exemptions

a) Services provided to the united nations or an international organisation declared by the central government
b) Services provided to a developer of Special Economic Zone (SEZ) or a unit of a Special Economic Zone which satisfy prescribed conditions.
c) Services provided for official use of a foreign diplomatic mission or consular post in India/ Service provided for personal use of family member of diplomatic agents or career consular officers posted in foreign diplomatic mission or consular posted in India.