GST ON RENTING OF THE RESIDENTIAL AND COMMERCIAL PROPERTY
Under Goods and Services Tax (GST), renting of residential and commercial property is considered as ‘supply of service’.
GST on renting of residential property
Rental income in the case of residential property has undergone a drastic change with effect from 18th July 2022. Hence, in order to go through the entire scenario of GST applicability on renting of residential property, it has been bifurcated the same in the following three periods -
Comparative analysis of GST exemption on renting of residential dwelling for all the periods i.e., from 1st July to 2017th July 2022, from 18th July 2022 to 31st Dec 2022 and from 1st January 2023 to till date.
| Conditions to be satisfied for availing GST exemption on renting of residential dwelling | ||
|---|---|---|
| 1st July 2017 till 17th July 2022 | 18th July 2022 till 31st Dec 2022 | 1st January 2023 to till date |
| The registered person is engaged in providing service relating to renting of residential dwelling and | The registered person is engaged in providing service relating to renting of residential dwelling and | The registered person is engaged in providing service relating to renting of residential dwelling and |
| The rented residential dwelling is used by the tenant for the purpose of residence. | The rented residential dwelling is used by the tenant for the purpose of residence and | The rented residential dwelling is used by the tenant for the purpose of residence and |
| The tenant is not registered under GST. | The tenant is not registered under GST. Except, if the registered person (tenant) is proprietor of a proprietorship concern and rents the residential dwelling in his personal capacity for use as his own residence. Such renting is on his own account and not that of the proprietorship concern | |
Comparative analysis of GST applicability on renting of residential dwelling for both the periods i.e., from 1st July to 17th July 2022, from 18th July 2022 to 31st Dec 2022 and from 1st January 2023 to till date.
| GST applicability when the residential dwelling is used for residential purpose and | 1st July 2017 to 17th July 2022 | 18th July 2022 to till date |
|---|---|---|
| the tenant is registered under GST | NIL | GST applicable @18% and GST is payable by tenant under reverse charge. |
| the tenant is not registered under GST | NIL | NIL |
| Only the landlord is registered under GST | NIL | NIL |
| Not used for residential purpose | GST applicable-18% | GST applicable-18% |
GST on renting of commercial property
GST applicability on renting of commercial property is quite simple, GST mandates the owner the property to get registered if income from such property breaches the basic threshold limit of 20 Lakhs. Accordingly, GST is applicable @ 18% under forward charge on renting of commercial property
| Particulars | Status of landlord | Status of tenant | GST applicability |
|---|---|---|---|
| Renting of commercial property | Registered | Registered/ Unregistered | Taxable @18% |
| Renting of commercial property | Unregistered | Registered/ Unregistered | Exempt |
Input Tax Credit
The tenant can claim the GST paid on rent to offset other tax liabilities. Put simply, if the conditions outlined in Section 16 of the CGST Act 2017 are met, the Input Tax Credit (ITC) for GST paid on rent can be utilized
ITC on repairs and renovation of property given on rent.
| Expense | ITC Eligibility |
|---|---|
| Repairs and maintenance expenditure, brokerage etc | ITC is eligible, only to the extent it is not capitalised |
Disclaimer:
“The information contained herein is only for informational purpose and should not be considered for any particular instance or individual or entity. We have obtained information from publicly available sources, there can be no guarantee that such information is accurate as of the date it is received, or it will continue to be accurate in future. No one should act on such information without obtaining professional advice after thorough examination of particular situation.”
Prepared On:
17/10/23
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