Rent is subject to GST
Renting your home is seen as an augmentation of service under the tax system. The Goods and Services Tax (GST) law, which was implemented in July 2017, now applies to rental revenue. Under the GST framework, rent is now considered a taxable provision of service.
GST-registered businesses must pay 18% GST when renting corporate residences and guest houses to workers.
The GST Council has removed a tax break previously granted to renting of residential units under the GST regime, which would raise the cost of presenting company guest houses or employee accommodation facilities by GST-registered companies.
During the modification, which was published following the 42nd sitting of the GST Council on July 13, 2022, and took effect on July 18, 2022, GST-registered renters would be required to pay GST at 18%, regardless of whether the landlord is GST-registered or otherwise.
The new regulation requires a GST-registered renter to pay GST on rent through the reverse change method and then claim ITC on the payment made.
GST on rent is applicable.
The presence of GST on rent is influenced by two factors:
- Type of property
The GST on rent applies to both residential and business buildings rented. Even if a residential property is rented for business reasons, the rental revenue is subject to GST on rent.
It is crucial to note that your GST duty will stay unchanged as long as you have rented out your property for commercial purposes, regardless of the type of its use.
If you rented your residential property for residential reasons to a person who is not registered for GST, GST on rental revenue is not payable.
- Rental income limit
The necessity to pay GST on rent occurs under the GST regime when you have an annual rental income of Rs 20 lakhs or more. Previously, this barrier was set at Rs 10 lakhs.
GST on rent
If either of the aforementioned circumstances applies, you must pay 18% of your rental revenue as GST on rent.
How do I pay the GST on my rent?
If GST on rental revenue is relevant, the landlord must register and pay tax.
ITC for GST on rent
If you fulfil all of the eligibility requirements, one can claim an input tax credit on GST on rent.
Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.
