Service tax on paying guest service...

This query is : Resolved

Tapan (Querist)
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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?

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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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.