Tax of 18% on rent paid is applied to tenants registered under GST
Tenants, registered under the GST, are required to pay the Goods and Services Tax at the rate of 18% on the rental of the property, under the new GST regulations effective July 18.
The 18% tax on rent paid only applies to GST-registered tenants, which means that a person who is GST-registered for a business or profession would be subject to 18% GST on that rent already paid. paid to the owner.
Before that, only commercial properties such as offices or retail space for rent or for rent attracted GST. There is no GST for rent or lease of residential properties by companies or individuals.
Under the new regulations, GST-registered tenants will have to pay taxes under the reverse charging mechanism (RCM). Tenants can claim GST to be paid under the Input Tax Credit as a deduction.
Tax will only apply when the tenant is registered under GST and is responsible for filing GST. Property owners do not have to pay GST.
“If any salaried person has rented a house or apartment to live in, they do not have to pay GST. However, a GST registered person who conducts a business or profession is subject to 18% of GST. on that rent paid to the owner,” explains Archit Gupta, founder and CEO at ClearTax. mint.
A GST registered person, who provides services from a rental housing estate, will have to pay tax at the rate of 18%.
Under the GST law, registered persons include individuals and corporate entities. GST registration is required when a person’s business or profession has an annual turnover in excess of the threshold.
Limits under GST laws vary by nature and provider. The threshold limit for a person who has signed up to provide the service is Rs 20 lakh in a financial year.
The limit for a single supplier of goods is Rs 40 lakh. However, if the registered legal entity is located in any of the northeastern states or special category states, the threshold limit is Rs 10 lakh per fiscal year.
Who will influence this?
The new changes, implemented after the 47th meeting of the GST Council, will impact companies and professionals who have rented residential or rental property.
The rent that companies pay for residential properties used as guest houses or employee residences will now attract 18% GST. This will increase employee costs for companies that are providing free accommodation for employees.
Separately, the government on Friday said GST would not be applied to residential units if they are privately leased for personal use, according to a PTI report.
The government says GST is only charged when the unit is rented out to a business. “There is no GST when it is privately rented for personal use. There is no GST even if the owner or partner of the company rents the residence for personal use,” the center said. according to the report.
