Service tax applicability on letting out business

[Sarwan Agarwal]

Dear Sir, My client has taken a residential house on rent. He is using the house for letting out to his clients on monthly or weekly basis. What is the liability of Service Tax in this case and who is liable for to pay the owner of the house or my client. Regds

[Surender Gupta]

In case sub-letting is done for non residential activities, it is taxable. Further, in such case both the parties are liable to pay service tax.

[Sarwan Agarwal]

Dear Mr. Gupta In ur reply u r of the opinion that both the party will be liable to service Tax. But as per clause (d) explanation 1 to Section 65 (105)(zzzz), property used solely for residence and for hotel, boarding house etc are not covered. Can u please clarify a little more. Best Regards

[Surender Gupta]

From the query, it appears that residential property is letout for non-residential purposes. Indeed, if the same is let out for residential purpose, no ST is payable.

AI Summary

Service tax liability for sub letting residential property for non residential use: both owner and occupier can be liable.
Service tax applies when a residential premises is sub let for non residential or commercial accommodation; such conversion of use renders the activity taxable and can give rise to joint liability of the owner and the occupier who sub lets. Letting solely for residential accommodation remains excluded from service tax.