Clarification: 18% GST On House Rent?

The government clarified on August 12, 2022, via the official Twitter account of the Press Information Bureau Fact Check (@PIBFactCheck), in response to claims that the country’s house rentals may rise as a result of the new changes to the GST law.

The levy is only applicable when residential units are rented to business entities; it is not applicable when residential units are rented to private individuals for personal use.

Also Read: Summary of clarification on 47th GST Council Meeting’s Recommendation

Any rent paid to the owner by a GST-registered person who works in business or profession is subject to 18% GST because only tenants who are GST-registered are liable to the tax on rent.

Previously, the GST only applied to leased or rented commercial real estate

Previously, the GST only applied to leased or rented commercial real estate, such as offices or retail locations. GST was not applied to rent or lease payments made by businesses or private people for residential properties.

Only tenants who are registered under the GST are subject to the 18% tax on rent paid, therefore any rent paid to the owner by a GST-registered person who engages in business or profession would be subject to GST at the rate of 18%.

Until July 17, 2022, the rent of business property was subject to GST; however, beginning July 18, 2022, GST will be levied if the dwelling is rented or leased by a GST-registered person or entity.

Rental of residential properties exempt up until July 17, 2022

The 47th GST Council meeting suggested that the tenant pay 18% GST on a reverse charge basis (RCM). However, they are able to deduct this amount from their GST filings while still paying sales tax.

Additionally, the rental of residential properties was exempt up until July 17, 2022, regardless of the tenant’s status, that is, whether the service provider or service recipient is registered or not.

The clarification says:

• Renting of residential unit taxable only when it is rented to business entity
• 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

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