According to the new GST laws that went into effect on July 18, a renter who is registered with the GST must pay a Goods and Services Tax of 18% when renting a property. The 18% tax on rent paid is only applicable to renters who are GST registered.
Previously, only commercial buildings such as offices or retail premises rented or leased were subject to GST. There was no GST on corporate or individual rent or lease of residential properties.
According to the new laws, a GST-registered renter will be required to pay the tax using the reverse charge method (RCM). The renter may deduct the GST paid through Input Tax Credit.
The tax will only be levied if the renter is GST registered and required to file GST returns. The property’s owner is not required to pay the GST.
“If a commonly salaried person rents or leases a residential dwelling or flat, they are exempt from paying GST.
However, a GST-registered individual who engages in business or profession must pay 18% GST on such rent paid to the owner “Mint quoted Archit Gupta, founder, and CEO of ClearTax.
A GST-registered individual who provides services from a rented residential property would be required to pay the 18% tax.
Individuals and corporate entities are both registered people under the GST statute. When a person’s yearly turnover exceeds the threshold level, he or she must register for GST.
The GST limit varies according to the nature and location of the supply. In a fiscal year, the threshold limit for a registered person offering services alone is Rs. 20 lakh.
The maximum for a provider of solely commodities is 40 lakh. However, if the registered firm is located in any of the northeastern states or special category states, the threshold limit is 10 lakh each fiscal year.
The new amendments, which went into effect following the GST Council’s 47th meeting, would have an impact on businesses and professionals who have rented or leased residential premises.
The rent paid by enterprises for housing assets obtained on rent to be utilized as guest homes or dwellings for staff will now be subject to 18% GST. This will raise employee costs for firms that provide free housing.