‘Renting’ has been defined in section 65B as ‘allowing, permitting or granting access, entry, occupation, usage 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’.

What is a ‘residential dwelling’?

The phrase ‘residential dwelling’ has not been defined in the Act. It has therefore to be interpreted in terms of the normal trade parlance as per which it is any residential accommodation, but does not include hotel, motel, inn, guest house, camp-site, lodge, house boat, or like places meant for temporary stay.

Would renting of a residential dwelling which is for use partly as a residence and partly for non residential purpose like an office of a lawyer or the clinic of a doctor be covered under Negative List?

This would also be a case of bundled services as renting service is being provided both for residential use and for non residential use. Taxability of such bundled services has to be determined in terms of the principles laid down in section 66F of the Act.

 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 these are in the nature of lodges or guest houses and hence not treatable as a residential dwelling

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One response to “Service Tax on renting of residential dwelling used as residence”

  1. Ashish Singhal says:

    If a pvt company provides a residential flat on rent to other pvt co, and the other pvt co will use the flat for residential puropse of its employee, then whether service tax will be applicable?? Rent will be above Rs. 10,00,000 p.a.

  2. ALI says:

    we have guest house where it is run by an individual employed with a manager and a security. The total average rent per year will be around 8.5Lakhs
    since the threshold limit is under 10L, do we need to pay service tax. FYI – We have registered service tax and got the number in Nov 2015
    Also when we calculate service tax, do we need to deduct manager/ security salaries from Rent per year to acheive the final figure to pay the service tax?

  3. Rajesh says:

    A residential property owned by a single individuals has been let out to a company for running a residential Guest House therein. Is the service tax applicable or not in this case?????

    • Amit kumar gupta says:

      Definitely service tax is applicable if it a residential property is letout to company for commercial purpose, but there is
      But If it is given for residential purpose than no service tax because renting of residential property for the purpose of residential dwelling covered under negative list under sec 66D.
      (Threshold limit for service tax is rs. 10lacs for every individual assessee).

  4. Kamal Kumar says:

    Sir,
    Please inform the notification number for exemption by which a Residential Property is given on Rent for Residence purpose . I am told that a Residential Property is exempted from the perview of Service Tax if given on rent.
    Rgds

    • Amit kumar gupta says:

      Rent of residential dwelling comes under negative list 66D. As per negative list means a services comes under negative list is no service tax liability.

  5. G S Kanwal says:

    I would like a clarification on applicability of service tax on the following:
    a) A residential property owned by three individuals has been let out to a Pvt. company for running a hotel therein.Each individual is paid Rs, 4.8 Lacs per annum with total rent paid by the company being 14.4 Lacs. Are the individuals liable to pay service tax or they are covered by exemption under Rs. 10 Lacs threshold?
    b) A residential property owned by a single individuals has been let out to a company for running a residential Guest House therein. Is the service tax applicable or not in this case?

    • Amit kumar gupta says:

      A service tax is applicable on the assessee wise not on property wise, so threshold limit is used by every individual separately.As per service tax law threshold is 10 lacs for each individual

      A given property is let out to private company and rent is rs. 14.4 lac but property is owned by three partner so rent is received by each partner rs. 4.8 lac. this case
      threshold limit is used rs. 4.8 lacs and still 5.2 lacs remains the same for each individual separately.
      So no service applicable in this case.

      2 A residential property let out for commercial purpose is absolutely liable to service tax but every assessee can take the benefit of threshold limit upto given services of rs. 10 lacs, so in this case service tax is applicable because guest house is comes under commercial proprty.

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