Renting of immovable property.

[MANASH MUKHERJEE]

Dear Sir ,

A party received refundable security deposit in addition to monthly rental . Wheather the amout received as refundable security deposit is chargeable to Service tax or is exempted?

[Rajagopalan Ranganathan]

Sir,

As per para2.2.8 (5) of Guidance Note 2 of Annexure A of D. O. F. No 334/1/2012-TRU,dated 16th March, 2012 (Education Guide issued by CBEC) "Returnable deposit is in the nature of security and hence do not represent consideration for service.

[Ganeshan Kalyani]

I agree with the views of Sri Rajagopalan Sir. but if that deposit is adjusted against the service then it would tantamount to consideration for service and liable to service tax. Thanks .

[DR.MARIAPPAN GOVINDARAJAN]

Deposit is only for security and not for consideration for the service provided or to be provided. Therefore it is not liable to service tax.

AI Summary

Security deposit for rental is not service consideration; it becomes taxable if later adjusted against rent.
Refundable security deposits in renting immovable property are not consideration for service and thus not liable to service tax when held solely as security; if the deposit is later adjusted or appropriated against rent or service charges, it constitutes consideration for the service and becomes taxable.