18% GST on rent

Goods and Services Tax
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Goods and Services Tax

Highlights

  • Applicable only for GST-registered tenants
  • Common-salaried persons won't attract tax

New Delhi: A tenant, who is registered under the GST, is required to pay Goods and Services Tax (GST) at 18 per cent for renting a property, according to the new GST rules effective from July 18 this year. The tax on rent paid is only applicable to tenants registered under the GST, meaning a GST-registered person who carries out business or profession will incur 18 per cent GST on such rent paid to the owner. Earlier, only commercial properties like offices or retail spaces given on rent or lease attracted GST. There was no GST on rent or lease of residential properties by corporate houses or individuals.

As per the new rules, a GST-registered tenant will be liable to pay the tax under the reverse charge mechanism (RCM). The tenant can claim the GST paid under Input Tax Credit as a deduction.

The tax will only apply when the tenant is registered under GST and liable to file GST returns. The owner of the property is not liable to pay the GST. "If any common salaried person has taken a residential house or flat on rent or lease, they do not have to pay GST. However, a GST-registered person who carries out business or profession must incur 18 per cent GST on such rent paid to the owner," explains a tax consultant.

A GST-registered person, who offers services from a rented residential property, will be liable to pay the tax at 18 per cent. Under the GST law, registered persons include individuals and corporate entities. The GST registration is mandatory when a person carrying out business or profession reaches an annual turnover of more than the threshold limit.

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