GST on rentals: Shock for tenants? Check new rules applicable from July 18

New Delhi: Under the Goods and Services Tax (GST), tenants are going to get a big shock. According to the latest reports, 18 per cent GST has to be paid on house rent. However, this can be claimed as a deduction in the taxpayer's IT returns. Tenants have to pay tax under Reverse Charge Mechanism (RCM).

Who Pays GST?

But PIB has given a fact-check explanation on this news. Tax is payable on the rent of a residential unit only when it is rented out to a business entity. No GST when rented to a private person for personal use. It is clarified that GST is not applicable even if the owner or firm partner's residence is rented out for personal use.

According to an article published by Mint, the decision taken in the GST Council meeting held on July 13, 2022, has brought the new GST taxes into effect in the country from July 18. According to the new GST rules, a tenant registered under GST will have to pay 18 per cent GST on the rent paid for residential property.

Earlier, it is known that the rent of residential properties was exempted from GST till July 17, 2022, irrespective of whether the tenant or landlord is registered. But, from July 18 this year, a registered tenant will have to pay 18 per cent tax on rental income.

Reacting to this, Clear's founder CEO Archit Gupta said that if a regular salaried person rents a residential house or flat, they are not required to pay GST. It has been clarified that 18 per cent GST must be paid on the rent paid to the landlord by registered traders, house owners and registered persons under GST.

Individuals with less than Rs 20 lakh per annum are exempted from this. A registered entity or a trader with a rental income of Rs 40 lakh or more per annum is liable to pay GST. However, this limit is Rs 10 lakh for traders in North Eastern states or special category states.