The new law of paying 18% GST on housing rent is explained.
Only business premises offered on lease are subject to the Goods and Services Tax (GST). Nevertheless, under a new law that went into effect on July 18, a GST-registered renter (including people and corporate organisations) is obligated to pay 18 percent tax. Will it have an effect on the rental of residential properties? Let us investigate!
Following the 47th meeting of the GST Council, the new regulation requires persons enrolled under Goods and Services Tax (GST) to pay taxes on both commercial and residential properties acquired on rent. Previously, the GST was solely applied to commercial premises. Meanwhile, the council agreed to impose an 18% GST on rent paid for utilising a residential property for commercial purposes beginning July 18, 2022.
What does the new GST regulation entail?
This only applies to GST-registered individuals who run a company or practise from their home. They must pay the tax using the Reverse Charge Mechanism (RCM) and then claim the GST paid through the Input Tax Credit (ITC) as a deduction.
Prior to this change, solely commercial premises were subject to GST when leased. There was no GST effect for individuals or business houses renting or leasing residential homes for professional reasons.
Who is required to register for GST?
If a company’s yearly turnover exceeds a certain level, which varies depending on the type and location of the supplier, it must register for GST.
While a registered person offering just services has a threshold restriction of Rs 20 lakh in a fiscal year, a seller of commodities has a threshold limit of Rs 40 lakh. But, if the registered firm is based in any of the northeastern or special category states, the annual threshold limit is Rs 10 lakh.
Who is affected by the new GST rule?
The modification, which went into effect following the GST Council’s 47th meeting, would influence a company and professionals who have taken residences on rent or lease for reasons other than personal use. For example, rent paid by businesses for employee housing or buildings leased by individuals to be used as guest homes would now be subject to GST.
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.
