Clarifying the public on the new GST (Goods & Service Tax) rules on rent, which came into effect from 18th July, the Central government said that “renting of residential unit taxable only when it is rented to business entity️".
It further clarified that “no GST when it is rented to private person for personal use; no GST even if proprietor or partner of firm rents residence for personal use."
The only change that has been brought about is that a tenant who is GST-registered will no longer be able to claim the benefit of exemption from GST on residential dwellings. Tax will need to be discharged by such tenants under RCM.
The change will impact corporate houses who have taken residential units on rent for their employees.
According to tax experts, until 17th July 2022, GST was applicable on the rent of a commercial property but from 18th July 2022, GST shall be charged if such residence is rented or leased by a GST-registered person/entity. As recommended at the 47th GST Council meeting, the tenant should pay 18 per cent GST on a reverse charge basis (RCM). However, they can claim this value as a deduction while they pay tax on sales in GST returns.
As per the update, ‘Persons’ include individuals as well as corporate entities. GST registration is needed when any person carries on business or profession and makes an annual turnover more than the threshold limit defined under the GST law.
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