Understand GST on renting residential dwellings: Taxability for residential or commercial purposes, reverse charge mechanism, IGST/CGST/SGST applicability, TDS, exemptions, and recent updates. Learn how the use of the property determines GST on rent and rental income. Stay informed about the latest changes effective from July 18, 2022.
Renting of residential dwelling is considered as a supply of service under CGST Act. When the residential dwelling is rented for the purpose of residence and the tenant is not registered under GST, it is not taxable. In other cases, i.e., when a residential dwelling is either rented for commercial purpose or the tenant is registered under GST, it is taxable @ 18% under reverse charge basis. When a tenant is registered under GST, it is deemed that the residential dwelling is used for commercial purpose, unless the tenant uses it in own capacity as own residence and not for business purpose.
Summary of the above provisions:
|
SL.NO |
USE OF RESIDENTIAL DWELLING | TAXABILITY |
|
1 |
Renting of residential dwelling for residential purpose | |
|
a |
Landlord registered & Tenant registered | 18% under Reverse Charge |
|
b |
Landlord unregistered & Tenant registered | 18% under Reverse Charge |
|
c |
Landlord registered & Tenant unregistered | Exempted |
|
2 |
Renting of residential dwelling for commercial purpose | |
|
a |
Landlord registered (registration of tenant does not matter) | 18% under Forward Charge |
|
b |
Landlord un-registered (registration of tenant does not matter) | Exempted |
Applicability of CGST/SGST/IGST: In case of renting of house property, ‘place of supply’ is the location of the property. Based on that, if the state of registration of the landlord and the state of location of the property are different, it is a case of inter-state supply and IGST is leviable. If both are in same state, it is a case of intra-state supply and CGST & SGST is leviable. State of registration of the tenant is irrelevant in deciding this chargeability. But, in case the tenant is registered in a state other than the state where the property is located, the tenant cannot claim the Input Tax Credit of CGST & SGST both.
Renting of religious places: Renting of religious place meant for public by registered charitable trust or religious trust is exempted from GST in the following cases:
(i) Rent of room is than Rs.1000 per day; or
(ii) Rent of shop or other places for business is less than Rs.10,000 per month; or
(iii) Rent of community hall is less than Rs.10,000 per day.
GST on expenses made on property given on rent: GST paid for carrying out repairs and maintenance expenses or brokerage etc of the property given on rent is allowed as Input Tax Credit to the extent it is not capitalized.
Applicability of TDS: A registered tenant should deduct TDS at 10% if rent paid during a year exceeds Rs. 2.4 lakhs.
GST on rent charged for renting of immovable property by government or local authorities: GST on rent charged for renting of immovable property by government or local authorities to a registered person will be leviable under reverse charge basis. However, when the same property is rented to an unregistered person, the government would themselves deduct GST under Forward Charge basis.
GST on rent vs GST on rental income: ‘GST on rent’ and ‘GST on rental income’ are different. Provisions about GST on rent are already described above. But, GST on rental income is charges at 18% on the rental income, which is payable by the landlord if his property is let out for commercial use and his total rental income in a year exceeds Rs.20 lakhs.
Conclusion: From the above discussions, it must be underscored here that the applicability of GST on renting of residential property is based on the ultimate use of the property and not the type of the property. As long as the property is being used for commercial or business purposes, GST on rent and GST on rental income will be applicable even if the property type is residential. Moreover, as per the amendment brought after the 42nd meeting of the GST Council on July 13, 2022, which came into effect from July 18, 2022, if the property is being used for business purpose, GST registered tenants will be liable to pay GST at 18%, irrespective of whether the landlord is GST registered or not.
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Thanks for the article…
You mentioned “In other cases, i.e., when a residential dwelling is either rented for commercial purpose or the tenant is registered under GST, it is taxable @ 18% under reverse charge basis”
However it’s a bit wrong I guess…as RCM will not be applicable where the purpose is commercial…normal forward charge will be applicable in that case..