Tenants Required To Pay 18% GST On Rented Residential Properties; All You Need To Know

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Tenants Required To Pay 18% GST On Rented Residential Properties; All You Need To Know

Under the recommendations of the 47th GST Council meeting, tenants are required to pay 18 per cent GST on rented residential properties. The tax only applies to GST-registered tenants.

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Taxes will now be put on rent as the people or businesses registered for Goods and Services Tax (GST) and offer services from rented residential properties must pay a 10 per cent tax.

Under the recommendations of the 47th GST Council meeting, tenants are required to pay 18 per cent GST on rented residential properties. The tax only applies to GST-registered tenants. The tenant is responsible for paying the tax under the reverse charge mechanism (RCM). Thus, they can claim the value as an input tax credit deduction.

New Guidelines In Effect

Previously, GST applied only to commercial establishments such as offices and retail shops. Corporate houses or individuals do not have to pay the tax when renting or leasing residential properties.

A person who has done GST registration can either be an individual or a corporation. Businesses and professions whose annual turnover exceeds the threshold limit must register. Those supplying services have a threshold limit of ₹20 lakh, while those supplying goods have a threshold limit of ₹40 lakhs. According to reports, the limit is ₹10 lakh per financial year for entities located in northeastern or special category states.

Who Does The New Rule Apply To?

GST-registered individuals or companies who offer services from a rented residential property are subject to the new rules. Corporates and taxpayers who rent out houses or flats for their employees will also be impacted. Guest houses or residences for employees, for instance, will be taxed, and it will increase the cost of providing free accommodation to employees for companies.

In India, the new GST rule will increase the cost of any residential rental agreement involving a registered person. Further, input tax credits may be sought because such services are for employees' personal use.

Salaried individuals leasing apartments will not be subject to the 18 per cent GST. Whether the tenant is registered or unregistered, no tax was required to be discharged by the landlord.

Has There Been Any Other GST Changes?

During the 47th GST Council meeting, the interim reports on the correction of duty inversions and exemptions were accepted. From July 18, pre-packaged and pre-labelled retail packs, including curd, lassi, and buttermilk, were taxed. Additionally, the Council imposed a GST of 18 per cent on bank check fees.

Previously, hotel rooms under ₹1,000 were exempt from GST but are now subject to 12 per cent. According to reports, hospital room rent exceeding ₹5,000 per day per patient, excluding the intensive care unit (ICU), will also be taxed at five per cent without an input tax credit.

Additionally, the GST on petroleum and e-waste has been increased to 12 and 18 per cent, respectively, from five per cent. In addition, tax exemptions granted by the Reserve Bank of India (RBI), the Insurance Regulatory and Development Authority (IRDA), the Securities and Exchange Board of India (SEBI), the Food Safety and Standards Authority of India (FSSAI), and GST have been withdrawn.

Also Read: 'Housing For All': Can Society Prohibit Unmarried People From Renting A House?


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