My client has a land which is used for parking cars by general people by paying parking charges. Is service tax applicable on parking services?
—CA Surinder Mittal
As per the definition of taxable service under the service category renting of immovable property service, taxable service with effect from June 1, 2007 means “any service provided or to be provided to any person, by any other person by renting of immovable property or any other service in relation to such renting for use in the course or furtherance of business or commerce.
Explanation 1: For the purposes of this sub-clause, “immovable property” includes:
(i) building and part of a building, and the land appurtenant thereto;
(ii) land incidental to the use of such building or part of a building;
(iii) the common or shared areas and facilities relating thereto; and
(iv) in case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate, but does not include—
(a) vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes;
(b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land;
(c) land used for educational, sports, circus, entertainment and parking purposes; and
(d) building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities.
(v) vacant land, given on lease or licence for construction of building or temporary structure at a later stage to be used for furtherance of business or commerce.
Explanation 2: For the purposes of this sub-clause, an immovable property partly for use in the course or furtherance of business or commerce and partly for residential or any other purposes shall be deemed to be immovable property for use in the course or furtherance of business or commerce [Section 65(105)(zzzz)]
Based on the above definition of taxable service it can be seen that vacant land used for parking purposes is outside the preview of taxable service because of the specific exclusion provided to it under explanation 1 (iv) (c) and hence your client shall not be liable to pay service tax on the parking charges collected by him.
The writer is with M.Sheth & Co a chartered Accountancy firm in Mumbai and can be reached at firstname.lastname@example.org