Do all tenants need to shell out more?


Yes, you heard that. House rent will now be taxed. GST-registered persons or companies, which offer services from a rented residential property, are liable to pay per cent tax

Now 18% GST on house rent: Do all tenants need to shell out more?

A GST-registered tenant now needs to pay a GST of 18 per cent for renting a residential property. Representational picture/AFP

Hotels, hospital beds, and now rent, all of them are taxed. Tenants have to pay the goods and services tax (GST) at 18 per cent for renting a residential property, according to new rules. But does it apply to all?

Also read: Do we have to pay GST on ICU beds, crematorium services?

What’s this new rule?

A tenant is required to pay 18 per cent GST on the rented residential property effective from 18 July, as per the recommendations of the 47th GST Council meeting. It is only applicable to tenants registered with the GST system.

However, the tenant is liable to pay the tax under the reverse charge mechanism (RCM). This means they can claim the value as a deduction under the input tax credit.

Earlier, only commercial establishments like offices or retail shops given on lease attracted GST. There was no GST on rent or lease of residential properties by corporate houses or individuals, reports NDTV.

Who has to be registered with the GST?

Under the GST law, a registered person could be an individual or a corporate entity. This registration is compulsory if the business or profession reaches an annual turnover of more than the threshold limit.

The threshold limit for a registered person supplying services is Rs 20 lakh and Rs 40 lakh for the supplier of goods. However, if the registered entity is located in the northeastern or special category states, the limit is Rs 10 lakh per financial year, reports NDTV.

Who does the 18 per cent tax apply to?

The new rules apply to GST-registered persons or companies who offer services from a rented residential property.

It will also impact corporates and taxpayers who have rented out houses or flats for their employees. For example, guest houses or residences for employees will be taxed. This will increase the cost for companies offering free accommodation to employees.

Abhishek Jain, partner (indirect tax) at KPMG in India, told News18, “The new GST rule will increase the cost of every residential rent agreement where the transaction involves a registered person, such as a company or a corporate.”

“Further, input tax credit in respect of such transactions may be sought… on the ground of the said services being for the personal use of the employees,” he added.

What about salaried individuals?

The 18 per cent GST will not apply to salaried individuals who have leased an apartment.

Archit Gupta, founder and CEO of Clear Tax told Mint, “If any common salaried person has taken a residential house or flat on rent or lease, they do not have to pay GST.”

Mahesh Jaising, partner and leader of Indirect Tax at Deloitte India said that no tax was required to be discharged by the landlord whether the tenant was registered or unregistered, reports Mint.

Have there been any other GST changes?

Yes. The 47th GST Council meeting decided to accept the interim reports by a group of ministers on the correction of duty inversion and exemption.

Pre-packaged and pre-labelled retail packs, including curd, lassi and buttermilk, were brought under GST from 18 July. Also, the Council decided to impose 18 per cent GST on fees charged by banks to cheques.

Hotel rooms under Rs 1000 were exempted from tax earlier but have now been brought under the 12 per cent GST slab.
Hospital room rent, excluding intensive care unit (ICU), exceeding Rs 5,000 per day per patient will also be taxed at five per cent without the input tax credit, reports News18.

The GST on petroleum and e-waste has also increased to 12 and 18 per cent respectively from the earlier five per cent. Tax exemption on services extended by the Reserve Bank of India, Insurance Regulatory and Development Authority (IRDA), Sebi, Food Safety and Standards Authority of India (FSSAI), and GST has also been withdrawn.

With inputs from agencies

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