GST ON RENT (COMMERCIAL AND RESIDENTIAL PROPERTY)
GST ON RENTING OF IMMOVABLE PROPERTY FOR COMMERCIAL PURPOSE
Renting of any immovable property for a business or commercial purpose would attract GST @ 18% on the taxable value. In case of Commercial purpose, GST would be collected by the Owner/ Landlord and would be payable to the GST Department under forward charge mechanism.
| OWNER/LESSOR | TENANT/LESSEE | GST PAYABLE | INPUT TAX CREDIT |
| UNREGISTERED | UNREGISTERED | NO GST | NOT APPLICABLE |
| UNREGISTERED | REGISTERED | NO GST | NOT APPLICABLE |
| REGISTERED | UNREGISTERED | GST UNDER FORWARD CHARGE PAYABLE BY OWNER | ITC CAN BE CLAIMED BY THE OWNER |
| REGISTERED | REGISTERED | GST UNDER FORWARD CHARGE PAYABLE BY OWNER | ITC CAN BE CLAIMED BY THE OWNER |
GST ON RENT OF IMMOVABLE PROPERTY FOR RESIDENTIAL PURPOSE
GST had been exempted on renting of residential property to any person up to 17th July, 2022 but according to the recent amendment under GST Act, GST is applicable on Residential Property with effect from 18th July, 2022 Renting an immovable property is considered as a supply of service and it attracts GST @ 18%.
- If any residential property is rented out to a registered person now, Tenant (i.e., the recipient) will be liable to pay tax at the rate of 18% under the reverse charge mechanism.
- However, GST is not attracted if the residential property is rented out to any unregistered person and therefore no liability would arise under GST.
- So, if the Tenant is registered under GST, then only GST would be liable to be paid.
- In case of residential property, it does not matter if the Landlord is registered/unregistered under GST.
| OWNER/LESSOR | TENANT/LESSEE | GST PAYABLE | INPUT TAX CREDIT |
| UNREGISTERED | UNREGISTERED | NO GST | NOT APPLICABLE |
| UNREGISTERED | REGISTERED | GST UNDER RCM PAYABLE BY TENANT | ITC CAN BE CLAIMED BY THE TENANT |
| REGISTERED | UNREGISTERED | NO GST | NOT APPLICABLE |
| REGISTERED | REGISTERED | GST UNDER RCM PAYABLE BY TENANT | ITC CAN BE CLAIMED BY THE TENANT |
REGISTRATION
It is the choice of the landlord or the owner whether he/she wants to take registration in the same state in which the property is situated or in different state. It is left to the option of the landlord. They must identify the place of supply to decide if CGST and SGST is charged or IGST applies.
Any business whose aggregate turnover exceeds Rs.20 lakhs in a financial year has to mandatorily register under Goods and Services Tax (GST). This limit is set at Rs 10 lakhs for North Eastern and hilly states flagged as special category states.
SECTION 194I – TDS ON RENT
While talking about renting of immovable property, liability under Section 194I also attracts. Section 194I requires to deduct TDS on payment of rent to any resident (Landlord). It imposes an obligation for TDS deduction @10% on persons (other than individual/HUF) making rental payments to resident Indians above a specified limit, i.e., Rs.2,40,000 in a year. However, in case of Individuals/HUF, if the total sales/gross receipts/turnover exceeds limit as per section 44AB during the preceding financial year in which such income is credited or paid by way of rent, shall be obligated to deduct TDS @10% under this section.
The TDS is applicable both to residential and commercial properties and it shall be paid on the Gross Amount excluding GST.
TDS must be deposited by the 7th of the subsequent month except for the month of March. However, for the month of March, TDS needs to be deposited by 30th April.
FAQs
Q.1. If any Company/LLP/Firm/AOP/BOI takes a residential property for the purpose of residence to rent its employees, would it attract GST?
Residence provided to its employees will be considered as business expenditure. Therefore, GST will be paid under RCM and the ITC of the GST can be claimed by the Tenant.
Q.2. Can a composition dealer who is registered under GST claim ITC if it takes a residential dwelling for the purpose of residence on rent?
A composition dealer who is registered under GST if takes a residential dwelling for the purpose of residence on rent, it will be considered as an item of business expenditure. GST will be paid under RCM but as per section 10(4), ITC of the GST paid cannot be claimed as they pay tax at prescribed lower rates.
Q.3. What will be the treatment of GST if a proprietorship concern takes a residential property on rent for himself or his family?
When an individual who is registered under GST as a proprietorship concern takes a residential dwelling on rent for himself or his family, then it will be considered as personal expenditure and not a business expenditure. So, personal expenditure would also attract GST under reverse charge mechanism but it cannot claim ITC against the GST paid.
Q.4. When a residential dwelling is taken by a registered person on rent for commercial purpose, who will pay GST?
When a residential dwelling is taken on rent for commercial purpose by a registered person, it will be treated at par with the commercial unit. If the landlord is unregistered, then GST shall not be levied either to the landlord or the tenant. If the landlord is registered, GST will be charged on forward charge basis and the recipient can take the ITC of the same.
Sachin
Sir, I have a property – Commerical, rented to XYZ Company. The property is on my Wife’s name and she is not registered under GST. I am sure my tenant “XYZ Company” must be under GST. what is this scenario and how to handle this? I am on the 7th scenario of your diagram.