Section 65B(41): “renting” means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession of control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property”.
Provision relating to Negative List
Renting of Hotel, Inn, Guest house, etc. are not included in the Negative List as specified under Section 66D of the Finance Act, 1994.
Provisions relating to exemptions
Small Service Provider
Vide Notification No 33/2012-ST, dated 20.06.2012 – Exemption to Small service providers having taxable turnover of less than 10 Lakhs and providing services other than by way of under a brand name.
Import of Technology
Vide Notification No. 14/ 2012-ST, dated March 17, 2012 – Exemption in respect of Taxable service involving import of technology, from so much of service tax, as is equivalent to the extent of amount of R&D Cess payable on the said transfer of technology under the provisions of section 3 of the Research and Development Cess Act, 1986.
To Foreign Diplomatic missions and their personnel
Vide Notification No 27/2012-ST, dated 20.06.2012 – Exemption for all the taxable services provided by any person, for the official use of a foreign diplomatic mission or consular post in India, or for personal use or for the use of the family members of diplomatic agents or career consular officers posted therein.
Services by TBI or STEP
Vide Notification No 32/2012-ST, dated 20.06.2012 – All taxable services provided by TBI or STEP have been exempted
Services provided to SEZ
Vide Notification No 40/2012-ST, dated 20.06.2012, all taxable services received by a Unit located in a Special Economic Zone (SEZ) or Developer of SEZ for the authorized operations, has been exempted from the levy of whole of the service tax.
Item No. 18 of Notification No. 25/2012-ST, dated 20-6-2012 grants exemption to certain services by way of renting of hotel, inn, guest house etc. which is shown as below:
“18. 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;”
Provisions relating to Valuation and Abatement
Section 67 read along with Service Tax (Determination of Value) Rules, 2006 provides the manner of determining the value of taxable services on which service tax should be levied.
In respect of Renting of Hotels, Inn, Guest Houses, etc., no specific provision for determination of taxable value has been provided. However it has been clarified that the value of taxable services is the total amount of consideration consisting of all components of the taxable service and it is immaterial that the details of individual components of the total consideration are indicated separately in the invoice. Thus, the value of taxable services is to be determined in terms of provision of Section 67 read with the prescribed rules.
As per entry No. 6 of Notification No. 26/2012-ST, dated 20-6-2012 the abatement is permitted to the extent of 40% of the gross amount charged and the service tax is payable on 60% of the gross amount charged from the customer. The service provider is not entitled to the Cenvat Credit on inputs and capital goods. He is entitled to the credit of service tax paid on input services.
Provisions relating to Cenvat Credit
The Credit is available to the service provider in respect of the duty or tax paid on Capital Goods, inputs and input services.
Provisions relating to point of taxation
In the case of Renting of Hotels, Inn, guest houses, etc, the organizations insists on advance from various customers unless the client has already established credit line with the service provider. The advance may sometimes be received prior to 2-3 months of providing accommodation services. In case of marriage, sometimes, the banquet halls are booked 5-6 months in advance. As per Point of Taxation Rules, the service tax is payable when the amount is received even if no invoice is raised at the time of receiving the amount (in fact, invoice will have to be raised within 30 days from the date of receipt of advance-Rule 4A of the Service Tax Rules, 1994).
Provisions relating to Place of Provision of Service Rules, 2012
The Place of Provision of Service Rules, 2012 contains different rules for different nature of services. Since renting services are required to be performed in relation to immovable property, Rule 5 of Place of Provision Rules, 2012 is relevant for this category of service is as follows:
Rule 5: The place of provision of services provided directly in relation to an immovable property, including services provided in this regard by experts and estate agents, provision of hotel accommodation by a hotel, inn, guest house, club or campsite, by whatever, name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including architects or interior decorators, shall be the place where the immovable property is located or intended to be located.
Thus if the property is located within taxable territory, services shall be taxable, else not.
Provisions relating to reverse charge
Renting of Hotels, Inn, Guest Houses, etc., is not included under the mechanism of Reverse Charge. Hence, the person providing the service shall be the person liable to pay service tax.