The Centre on Friday said GST will not be applicable on residential units if they are rented out to private persons for personal use. The Government dismissed media reports which claimed that there is 18 per cent Goods and Services Tax (GST) on house rent paid by tenants.
In a tweet, the Government said GST would be levied only when the residential unit is rented out to a 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,” it clarified. The clarification provided relief to GST-registered proprietors or partners in GST-registered firms who take on rent immovable property for their personal use such as renting a house for family accommodation.
Tenants registered under the GST are now required to pay 18 per cent tax for renting a property but the tax will only apply to GST-registered tenants. The property owner is not liable to pay the GST. However, a tenant who offers services from a rented residential property will be liable to pay 18 per cent GST tax.
A tenant will be liable to pay tax under the Reverse Charge Mechanism (RCM). The tenant can claim the GST paid under Input Tax Credit as a deduction.
GST-registered tenants include individuals and corporate entities. GST registration is mandatory for persons carrying out business or profession of annual turnover above the threshold limit.
The new GST provision will impact the companies and professionals who have taken residential properties on rent or lease for conduct of business or profession. Earlier, only commercial properties like offices or retail spaces given on rent attracted GST and private properties were out of its ambit.