11 February 2016
A rented his residential property to B, who is running paying guest business, now B got a contract from C, a hospital, to arrange stay for its staff at the said property.
So the questions are 1. Should A charge service tax while collecting rent from B? 2. Whether B should charge service tax on the services rendered by him to c? 3. Or is it exempted under negative list?
12 February 2016
Renting of Immovable Property for Commercial Purposes is a taxable service. Here A has let out his property to B who is doing commerce from the same premises. Using a residential house as paying guest accommodation is a commercial activity. Hence A has to charge 14.5% Service Tax and Swatch Bharaat Cess from B on the rent received. B has contracted with C Hospital, a commercial venture, to rent out its premises as staff quarters. This is also renting out Immovable Property for Commercial Purposes, because the agreement is with a commercial organization for renting the premises. The us to which the commercial organization puts the rented premises is no concern of the lessor / landlord. Hence B should charge Service Tax and Swatch Bharat Cess from C.
However, had B entered into a contract for renting out the premises to some employee of C for residential purposes, no service tax would have been leviable.
No, the transactions listed above are not covered by the Negative List.
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