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Reverse charge for renting of building

Max Payne (employed) (2574 Points)

31 January 2012

Dear members,

Our client is NRI in Doha. He is planning to lease a building for Rs.8 lakhs per month to a provider of Commercial Training and coaching service, which is a private limited company.

The building is situated in India.

So i understand that since the actual provider is not resident in india, the provisions of section 66A will apply and the Pvt ltd company has to pay service tax on the renting of immoveable property service (zzzz).

Is my understanding correct? Can the letting of building on lease be treated as import of service provided from outside india? And accordingly, reverse charge mechanism will apply accordingly?

Kindly clarify the query.

Thanks in advance....

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2 Replies

Saurabh Maheshwari (B.com,ACA) (5923 Points)
Replied 03 February 2012

No,letting of property by NRI doesn't means that the serv receiver(PVT CO) is importing the service because import should be taken to mean as service rec from outside the India and it has no bearing that who provides the serv. From outside India.for e.g.-If the Audit of a Indian co. is done by a CA firm outside Ind then it will be termed as import of serv by Ind co and sec 66A will come into the picture.Hope it will be clear.

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Max Payne (employed) (2574 Points)
Replied 06 February 2012

Thanks Saurabh...

But as per my understanding of Rule 3(1)(i) of Taxation of services (Recd from outside india) Rules [Import Rules], it is given that any of the following services provided in relation to immoveable properties situated in India shall be deemed to be import of service;

and in the list 'zzzz' is given, i.e., renting of immoveable property for commercial use...

And in taxmann's book, it is given that if service provider is having a normal place of residence outside india, then the service receiver should pay the service tax.

So can u throw some light on this, its having me little confused...? Any other experts comments or references are most welcome.

Thanks in advance..