Service Tax on right of collection of rent

[Kunal Pawar]

If one party 'A' is owner of property which he gives on rent to some tenants for commercial purpose and through Auction, 'A' sells the rights of collection of rent from the tenants to other party 'B' for amount of ₹ 50 Lacs per annum. 'A' receives ₹ 50 Lacs from 'B' per year. Is there any Service Tax liability on 'A' in the said case, if so, under which Service Tax category the service would be classifiable.

AI Summary

Property Owner Auctions Rent Rights: Is Service Tax Applicable? Examining 'Renting of Immovable Property' and Recovery Services. A property owner, referred to as 'A', auctions the right to collect rent from tenants to another party, 'B', for 50 lakhs annually. The query is whether 'A' is liable for service tax on this transaction. One opinion suggests that the transaction might be considered an actionable claim, exempt from service tax. Others argue that 'A' provides a taxable service under 'Renting of Immovable Property,' and 'B' acts as a recovery agent, potentially subject to service tax under 'Business Support Service' or 'Recovery Agent Services.' The necessity of reviewing the contract terms is emphasized for accurate classification.