A GST-registered tenant will be required to pay an 18% Goods and Services Tax (GST) for the rental of residential property, in accordance with new GST rules effective July 18. The 18% tax on rent paid applies to GST registered tenants.
Previously, only commercial properties such as offices or retail space rented or leased were subject to the GST. There was no GST on the rent or rental of residential properties by corporations or individuals.
Under the new rules, a GST-registered tenant will be required to pay tax under the reverse charge mechanism (RCM) and file GST returns. The lessee may claim the GST paid for the input tax credit as a deduction.
However, the owner of the residential property is not required to pay GST.
“If a common salaried person has taken a residential house or an apartment for rent or lease, he does not have to pay GST. 18% on that rent paid to the landlord,” explained Archit Gupta, founder and CEO of ClearTax, as reported by Mint.
The 47th meeting of the GST Council in June decided to accept the interim reports of the group of ministers on the correction of the inversion and the exemption of duties. Pre-packaged and pre-labeled retail packages, including curds, lassi and buttermilk, were subject to GST, effective July 18.
The limit under GST law varies depending on the nature and location of the supply. The threshold limit for a registered person providing services alone is Rs 20 lakh in a financial year.
Rent paid by businesses for accommodation rented for use as bed and breakfast or employee residences will now be subject to the 18% GST. This will increase payroll costs for companies that provide free housing to employees.