The Government has clarified that the new rule on levying 18% Goods and Services Tax (GST) on house rent for tenants is applicable to business entities only.
A tweet by the official twitter handle of the Press Information Bureau has stated that the levy is applicable in case of renting of residential units to business entities only and the levy would not be applicable when it is rented to a private person for personal use.
It was further clarified that “No GST even if proprietor or Partner of Firm rents residents for personal use,” the twitter handle said.
As per the new rule, a tenant, who is registered under the GST, is required to pay Goods and Services Tax at 18 per cent for renting a property, effective from July 18.
The 18 per cent tax on rent paid is only applicable to tenants registered under the GST, meaning a GST-registered person who carries out business or profession will incur 18 per cent GST on such rent paid to the owner
Earlier, only commercial properties like 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.
As per the new rules, a GST-registered tenant will be liable to pay the tax under the reverse charge mechanism (RCM). The tenant can claim the GST paid under Input Tax Credit as a deduction.
The tax will only apply when the tenant is registered under GST and liable to file GST returns. The owner of the property is not liable to pay the GST.
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