Service tax on Renting Immovable Property
Renting of immovable property is a taxable service and is subject to service tax. Queries on whether all types of properties are covered, how much is covered, what is not covered, etc are dealt in this article.
- Security or Rental Deposit – Service Tax is not applicable to any amount that is refundable and collected from the tenant as security or rental deposit. However, non-refundable deposit is subject to service tax.
- Reimbursement of actual Electricity Charges – are not subject to tax provided the exact/actual amount is collected as a pure agent. In case any markup (extra amount) is done on the bill or a lump sum amount is collected towards electricity charges, it is subject to ST.
- Maintenance Charges – towards the building is subject to service tax.
- Renting of Vacant Land – say, for parking or for temporary shed for marriage or for social function is subject to service tax except if the land is used for agriculture or agriculture related activities such as horticulture or floriculture or animal husbandry.
- Renting of Residential House – if used for residential purpose is exempt from service tax. However, renting of residential house for commercial purpose is subject to ST.
- Renting of Hotel, Inn, Guest House, Club, campsite or other commercial places meant for residential or lodging purposes having declared tariff of a room below Rs.1000 per day or equivalent is exempt from Service tax.
- Rent from space provided to Mobile Towers – Service tax is applicable.
- Rent from space provided for Vending Machines in a shop or complex – service tax is applicable.
- Renting of Convention Center – Service tax is applicable.
- Service Tax Rate – at 14% on the gross rent. The land owner can raise an invoice every month mentioning the rent plus service tax.
- Deduction from Rental Income – No expense such as security charges, electricity charges are allowed to be deducted from the gross rent. Property Tax (Municipal Taxes) PAID can be deducted from gross rent as per Notification No. 29/2012-ST
- Liability of payment of tax – Service recipient / tenant is liable to pay service tax. It is the responsibility of the land owner to collect it from the tenant and remit it to the department.
- Payment of Tax – the tax so collected has to be remitted to the department within due date [5th of the subsequent month/quarter depending upon the nature of the assessee; 6th of the subsequent month/quarter, if the payment is made electronically through internet banking]. Delayed/ non-payment attracts hefty interest and penalty.