GST On House Rentals: Do All Tenants Need To Pay 18 Per Cent Tax On Renting House? Check Here

The owner of the residential property, however, is not liable to pay the GST

A GST-registered tenant will be liable to pay a goods and services tax (GST) of 18 per cent for renting a residential property, according to the new GST rules effective from July 18. The 18 per cent tax on rent paid is applicable to tenants registered under the GST.

Earlier, only commercial properties such as offices or retail spaces given on rent or lease attracted GST. There was no GST on rent or lease of residential properties by corporate houses or individuals.

According to the new rules, a GST-registered tenant will be liable to pay the tax under the reverse charge mechanism (RCM) and liable to file GST returns. The tenant can claim the GST paid under Input Tax Credit as a deduction.

The owner of the residential property, however, is not liable to pay the GST.

"If any common salaried person has taken a residential house or flat on rent or lease, they do not have to pay GST. However, a GST-registered person who carries out business or profession must incur 18 per cent GST on such rent paid to the owner," explained Archit Gupta, founder and CEO at ClearTax, as reported by Mint.

The 47th GST Council meeting in June decided to accept the group of ministers’ interim reports on the correction of duty inversion and exemption. Pre-packaged and pre-labelled retail packs, including curd, lassi and butter milk, were brought under GST, effective July 18.

The limit under the GST law varies according to the nature and place of supply. The threshold limit for a registered person supplying services alone is Rs 20 lakh in a financial year.

The rent paid by companies towards the housing properties taken on rent to be used as guest houses or residences for employees will now attract 18 per cent GST. This will increase the employees' costs for the companies that are offering free accommodation to employees.