Fact Check: Who Will Have To Pay 18% GST On House Rent?

New Delhi: There has been some confusion over the new GST rules on rent, which became effective from July 18.

The Central government has clarified that the rent will be taxable only when the property is rented to a business entity.

“Renting of residential unit taxable only when it is rented to business entity️,” PIB said in a tweet.

“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,” PIB further stated.

The 47th GST Council meeting recommended that the tenant should pay 18% GST on a reverse charge basis (RCM) if a residence is rented or leased by a GST-registered person/entity.

Until July 17, GST was applicable on the rent of a commercial property.

“Renting of residential dwellings up to 17th July 2022 was exempt, regardless of the status of the tenant i.e. whether the service provider or service recipient was registered or unregistered. This meant that renting of property for residential purposes was exempt for all. However, w.e.f. 18th July 2022, a tenant who is GST-registered will become liable to GST on renting for residential purposes under the reverse charge mechanism,” Mahesh Jaising, Partner, Leader – Indirect Tax at Deloitte India told Mint.

“The change will impact corporate houses who have taken residential units on rent for their employees. GST will now be required to be paid by such registered taxpayers under reverse charge and can impact on the P&L, as the department can dispute the eligibility of credit, treating the same as used for personal consumption. This credit eligibility should be examined carefully by industry,” Jaising explained.

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