According to the GST act, renting of immovable property will be treated as supply of service under GST. However, in GST regime certain types of rent will attract GST. In this article, we look at types of rent that attract GST in India.
The Pre-GST Era
In order to get the complete knowledge of the concept, we will first look at the matter before GST regime, before the implementation of GST, the owners of the immovable property had to get themselves registered under Service Tax Act if their gross income from letting out of there immovable property exceeds Rs. 10 lakhs in a financial year. The owners of the property had to charge service tax @ 15% on their rental income from the property let out for commercial purpose. This was also applicable if a residential property was used for commercial purposes.
GST on Rental Income
The rental income from letting out of any property commercial or residential is exempted from GST upto Rs. 20 lakhs in any financial year. However, there would be no GST applicable if a house is given out for residential purposes, irrespective of the amount of income. Renting of properties is considered as a supply of services under the GST Act. Every commercial property let out will be considered as supply of service under GST and will be taxable at the rate of 18% and the place of supply of service will be considered as the location of the property.
Exemptions
GST will not be applicable in certain cases of renting of immovable property as mentioned below:
- When the property is given for
residential purpose.
- When the rental income from a property that is let out for commercial purposes does not exceed the threshold of INR 20 Lakhs annually.
- When the rent earned by a registered charitable trust or a religious trust and the rent of the space, be its business units, shops or community halls of such a charitable trust is INR 10,000 or less for a day.
GST Registration for Landlords
Every land owner who doesn’t fall under any of the categories that are exempt from paying GST on the amount of rent received by them, are mandatorily required to get themselves registered under the Goods and Service Tax and pay taxes at the applicable rates under GST.
Input Tax Credit
An individual who pays GST on the rent can take input tax credit for paying GST. In simple words, input tax credit on GST paid on rental income can be claimed if all the provisions to claim the input tax credit are fulfilled.