Renting of immovable property service

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

13 August 2014 Client who is state Govt road transport corporation specially engaged in passenger transport i.e public transport company. Corporation has given permission to the various book stalls, fruit stalls, canteen inside the premises of bus stand area and collected "license fee" as rent of such stalls (small shops) service tax is collected under Renting of Immovable property service.

However the corporation is also issuing licences to hawkers (i.e. individual feriwalas) granting permission to sale their goods at bus stand area for a minimum licence fee. Now service tax dept has issued notice to tax such licence fee under ambit of Renting of Immovable Property.
As the corporation is allowing permission only to sale the hawkers good.
No specific place/area is allowed to hawkers.
Objective of issuing such licence is only to facilitate proper administration over hawkers and for effective control over them.
Corporation has prescribed specific dress code to hawkers and given batches to them.
Hawkers are using open land of bus stand and entry to such area is open to common public at large.

Issue is whether Licence fee of hawkers will come under ambit of service tax under Renting of immovable property.

Kind request to all please share your views regarding this issue.

Thanks.

SUDHIR

TKKKKKK

TKKKKKK (Expert)
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13 August 2014 Yes because corporation society is providing space to sale to hawkers.

Rupesh Jain

Rupesh Jain (Expert)
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14 August 2014 yes service tax will be paid, rent or license fee charged by the corporation for the specified area .

Querist : Anonymous

Querist : Anonymous (Querist)

14 August 2014 Licence fee for use of space or premises is taxable as rent.

But here hawkers are permitted to sale there good on bus stand area.

Bus stand area is common public place used by public at large.

However licence fee is just to cover administration cost of controlling hawkers.

Still it will come under renting of immovable property service.

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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21 July 2025 This is a classic issue involving service tax on license fees collected by government or semi-government bodies for the use of immovable property, especially open/public spaces.

Key Points to Consider:
Service Tax on Renting of Immovable Property:
Under Service Tax law (pre-GST), "Renting of Immovable Property" includes letting out of any immovable property or any portion thereof for use, occupation or possession, whether or not for a payment or for any other consideration.

License Fee vs Rent:
Courts and the Service Tax Department have treated license fees for use of property or space similar to rent, especially when the licensee is given a right to occupy or use a specified area.

Issue with Hawkers:

Hawkers are not given specific demarcated space or exclusive possession of any part of the bus stand area.

They have only permission to sell goods in an open area accessible to public.

The license fee is described as a regulatory charge to control hawkers, cover administration, ensure order, etc.

No exclusive possession or specific area assigned.

Service Tax Department's Stand:
The department considers license fees collected from hawkers as renting of immovable property and therefore taxable.

Counter-Arguments:

Since no exclusive or specific area is allotted to hawkers, the payment is not for "renting" in the true sense.

It is a regulatory or administrative fee, not consideration for use of property.

The area is open to public, so not letting out any "immovable property" exclusively.

This fee should be treated as outside the scope of service tax on renting.

Legal Position / Precedents:

The courts have generally held that license fees for exclusive occupation of a defined space come under "renting of immovable property."

For general permissions without demarcated areas, the service may not fall under renting.

However, this area has varying judicial opinions.

Practical Advice:

If the license fee is charged for defined stalls or shops, service tax on renting applies.

If license fee is just a general fee for non-exclusive permission to operate in an open area (like hawkers without fixed spots), it might be argued as not renting.

Since department has issued a notice, it is advisable to respond with facts about no exclusive possession and regulatory nature of fee.

You may consider legal consultation or representation to clarify based on facts and local tribunal decisions.

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