Service Tax On Rented Immovable Property

“Immovable property” as defined in section 65 of the of Finance Act, 1994 as amended:

According to section 65 “Immovable property” means the following –

(i) Building and each part of it along with the land attached to it;

(ii) Land related with the use of the said building or any of its parts;

(iii) The common areas attached to the building; and

(iv) If the building is a part of any complex or an industrial estate, all common areas and facilities associated with the complex or estate.

Properties not considered as “Immovable property”:

“Immovable property” does not mean –

(a) Any vacant land used exclusively for agriculture, farming, animal rearing, etc.

(b) Any vacant land with or without the facilities associated with its use;

(c) Any land used for educational or sports purposes; and

(d) Any building used for residential purposes only and buildings like hotels, lodges, hostels, etc.

“Immovable property” includes:

Any immovable property partly used in the course of any trade or commerce and partly for residential purpose is considered as immovable property for use in the trade or commerce.

“Renting of immovable property” means:

“Renting of immovable property” means giving any immovable property through rent, letting out, lease, leave and license, or any means of like nature for use in the course of any business or commerce. It is immaterial whether there is any physical transfer of its possession or control. It is sufficient if there is allowing or giving access, entry, occupation, use. Such facility has to be either fully or partly.

“Renting of immovable property” does not mean:

The following does not come within the ambit of “immovable property” –

(i) Renting of immovable property to any religious body; or

(ii) Renting of immovable property to any educational institution for the purpose of providing knowledge on any subject except a commercial coaching centre.

“Taxable Service” means:

Any service provided to someone by any person through renting of any immovable property or any other service relating to the said renting for use in the course of a trade or commerce and it includes factories, offices, warehouses, exhibition halls, etc.

Taxability of rented immovable property:

Some of the immovable properties are liable to pay service tax. The chargeability of the said properties is as follows:

1. Renting property for entertainment or sports purposes – chargeable to service tax since it is not categorically exempted.
2. Permitting to erect a communication tower upon any building for money – chargeable to service tax.
3. Renting theatre halls by its owners to film distributors for the purpose of exhibition of films – chargeable to service tax.

Rate of Tax which is charged:

Rate of Tax that is charged as service tax is generally 10% of the value of the said services.