renting of immovable property

[Ramachandran and Ramachandran Associates Subramanian]

Our client is a partnership firm in ownership of a hotel at Mangalore. This hotel is leased to another individual on a monthly rent of Rs.2 Lakhs. The lessee is letting out rooms on daily rent and the declared tarrif is less than Rs.1000 per day. I would like to know whether my client would be liable for service tax on the rent collected since renting of Hotel is exempted vide Exemption notification  no. 25/2012 ( Enrty Sl.No.18). What would the scenario be if the declared tarrif is Rs.1000 or more. Can my client avail abatement of 60% of the value of taxable services rendered by him?

[sanjeev bajaj]

The case cited above may have different opinions, such as:-

 1. Simply, it can be treated as renting of commercial property as the service providers is not giving services of hotels etc, , hence no declared tariff and not covered under exemption.

2. There is no specific exemption as in the case of services by the specified exemption as per entry 29 of the mega exemption vide notification no. 25 dt. 20.06.2012. like to sub contractor if he provides to contractor whose services are exempt.

3. However, in my opinion, it is covered under entry no. 18 of mega exemption. If we read bold portion of entry no. 18 as follow:-

Services by way of renting of a hotel, inn guest house, club, campsite or other commercial places meant for residential or lodging purposes, having declared tariff of a unit of accommodation below rupees one thousand per day or equivalent;               

In your case, the owner has:-

I.  Leased the commercial  place

II. Meant for residential or lodging purpose

III. having declared tariff value of a unit below Rs. 1000/-

which fulfills the requirement of entry 18 of the mega exemption.

 Sanjeev Bajaj

 

 

AI Summary

Renting of hotel accommodation may be exempt where a unit's declared tariff is below the prescribed threshold, affecting service tax liability. Lease receipts from a hotel property may be exempt under the exemption for renting of hotels and similar lodging places if the unit has a declared tariff below the prescribed threshold; alternative views treat such receipts as rent for commercial property not covered by the hotel exemption. The exemption requires that the property be meant for residential or lodging purposes and that the declared tariff of a unit is below the statutory threshold. Availability of a 60% abatement is a distinct issue applicable only if the service remains taxable.