GST on Renting Of Immovable Property – Recent Amendments

Goods and Service Tax i.e. GST which is defined by Government as Good and Simple Tax . Is it really so ? We all know very well !!! And with effect from 18th July,2022 they have ventured to make it more simpler and again making it more complicated.

“Renting of Immovable property” service was already too complicated to understand even for a GST expert has been made more complicated through a recent notification effective from 18th July,2022. Why this date is chosen is beyond anyone’s imagination. Generally major changes should be made from New Financial year only so that transition and compliances are easier. But as I said earlier Government is in no mood to make the taxation simpler and easier.

Let us understand the recent changes with respect to Renting of Immovable property. The service is mainly divided into two categories one is Commercial property and other being Residential property.

Renting of Commercial property: This service has always been taxable under forward charge meaning thereby Supplier of Service ( i.e. Landlord) has to charge GST on the amount of rent. GST will not be leviable only in case where landlord is not registered. (his aggregate turnover is below the threshold limit of 20 lacs)

Renting of Residential Property for Residential use : Till 17th July ,2022 this service was exempt . However, from 18.07.22 there is no blanket exemption.

Renting of Residential Property for Residential use to a Business entity registered under GST:

Becomes taxable with effect from 18th July,2022. Service Provider is not liable to charge gst under forward charge but Service receiver will charge gst under Reverse Charge Mechanism ( RCM ). Even if a Business entity uses it for residential purpose for its employees/ Directors and debits the expenditure in its books of accounts then also it is liable to charge GST under RCM.

Renting of Residential Property for Residential use to a GST registered Proprietor for his personal use: Its exempt. So no liability/compliances for Service for Landlord and Tenant both. Assuming that rent is not claimed as expenditure in his books of accounts.

So it can be said that Renting of Residential property for residential use of un-registered person or personal use of registered proprietor will only be exempt from forward charge or reverse charge.

Taxability of Hotel Accommodation:

Up to 18.07.22 : Value of Accommodation per unit per day below Rs.1000/- was exempt.

From 18.07.22: Exemption has been removed. Now any Hotel accommodation up to Rs.7500/- will be taxable @ 12% and above Rs.7500/- will be taxable @ 18% (eligible for ITC)

Hostel Accommodation:

A Business entity providing Hostel Services to students: If Hostel is meant for short term stays with various facilities like Food, Internet, Laundry, Reception etc. then the service would be leviable to gst @12%. However, if it’s for long term stays with rental agreement then it would be exempt.

A business entity providing Hostel services to any Educational Institution / University: If service receiver is un-registered then its exempt. If Educational Institution / University is registered, then from 18.07.22 it has to pay tax under RCM @18%.

Educational Institution providing hostel services to students: Exempt

Commercial Coaching Institutes providing Hostel services to students: If service is bundled with Coaching then its taxable @18%. If Hostel facility is separate and for short term (say less than 1 year) then taxable @12%. If Hostel facility is for long term with proper rental agreement and not bundled with coaching service, then its exempt.

Dhramshalas/Religious places providing renting of immovable property (No Change in existing provisions):

Renting of rooms for residence: if charges are less than Rs.1000/- per day per room then exempt. Otherwise taxable.
Renting of premises, halls, Kalyan mandapam etc : If charges less than Rs.10000/- per day then exempt. Otherwise taxable.

Renting of shops or other commercial space: If charges less than Rs. 10,000/- per month then exempt. Otherwise taxable.

There are other issues also with respect to taxability under GST for renting of immovable property. Like location of property, place of registration of landlord, availability of ITC etc. making it more complicated. RCM being one of the worst provision. Even though its revenue neutral government is bringing more and more services and goods under it.

We hope government / GST authorities listen to feedback of professional organisations like ICAI in making things simpler.

Compiled by : CA Satish G. Sarda | GST Consultant and Past Chairman – Nagpur Branch Of ICAI