Services by way of renting of residential dwelling for use as residence
‘Renting’ has been defined in section 65B as ‘‘allowing, permitting or granting access, entry, occupation, usage or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property’.
The phrase ‘residential dwelling’ has not been defined in the Act. It has therefore to be interpreted in terms of the normal trade parlance as per which it is any residential accommodation, but does not include hotel, motel, inn, guest house, camp–site, lodge, house boat, or like places meant for temporary stay.
Scope of taxability of services by way of renting of residential dwelling for use as residence
It is worth mentioning that under service tax provisions service tax is not leviable in respect of services by way of renting of residential property for use as residence.
Departmental clarification regarding taxability of service
- Renting of a residential dwelling which is for use partly as a residence and partly for non residential purpose like an office of a lawyer or the clinic of a doctor is a case of bundled services as renting service is being provided both for residential use and for non residential use. Taxability of such bundled services has to be determined in terms of the principles laid down in section 66F of the Act.
- If a residential house taken on rent is used only or predominantly for commercial or non-residential use then the renting transaction is not covered in this negative list entry.
- If a house is given on rent and the same is used as a hotel or a lodge then the renting transaction is not covered in this negative list entry because the person taking it on rent is using it for a commercial purpose.
- If Rooms in a hotel or a lodge are let out whether or not for temporary stay then the renting transaction is not covered in this negative list entry because a hotel or a lodge is not a residential dwelling.
- If government department allots houses to its employees and charges a license fee then such service would be covered in the negative list entry relating to services provided by government and hence non- taxable.
- If furnished flats given on rent for temporary stay (a few days) then such renting as residential dwelling for the bonafide use of a person or his family for a reasonable period shall be residential use, but if the same is given for a short stay for different persons over a period of time the same would be liable to tax.