Service tax on accommodation provided in government facility

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SAMARJEET (Querist)
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09 November 2013 does an accommodation which is built by government and utilised by its staff for stay when on official duty has to pay service tax on its charges levied for the stay even though the rent for the building is charged by another government department.

1. please provide concerned circular/notification for exemption, if any.
2. if yes, then on what portion and at what rate the tax is to be provided.

thanks in anticipation of early reply.

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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10 November 2013 From the query it is not clear whether the official on duty has to pay rental charges for using the accommodation while on tour.

The next important matter is the accommodation provided in a commercial building or a residential one.

It has been clearly held in a number of decisions, that service tax is leviable on properties let out on rent since it is a commercial activity. However as per Section 66B (Negative List) of the Finance Act 1994 "Renting out of residential property for residential purposes is exempt from ST."

Even if the property let out is in the nature of Guest House / Holiday Home / Inn, etc. if the daily tariff is less than Rs.1,000/-, then no service tax is applicable as per the provisions of Negative List.

In all other cases, service tax is leviable on the rental income @12.36%.

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SAMARJEET

SAMARJEET (Querist)
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10 November 2013 To make more clear, the building is built by PWD,maintained by PWD and rent for the building also collected by PWD. The room charges levied are for providing linen etc,paying of a helper to maintain the room and to pay the rent to PWD.
If still the ST has to be paid then on what %, ST is to be levied.

Looking forward for an early reply

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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12 November 2013 The owner of the building is Government. The accommodation is not freely available to the public (I presume) and only government employees on official work can avail of the accommodation and services.

In such circumstances, no service tax is leviable. However, if the accommodation can be availed of by any government employee, even when he is on leave, then the nature of the premises becomes that of an Inn, by whatever name called. In such cases, irrespective of who levies the rent, if the tariff for the room is Rs.1000/- or more even in a single case, service tax is leviable after availing of an abatement of 40% of the bill @12.36% on the balance 60%. The Service tax leviable will then be 7.416% of the total invoice amount.

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