You all will agree that half knowledge is actually dangerous. The Indian government introduced several changes in the GST rates during its 47th meeting in June. The rates came into effect on July 18, 2022.
Many people shared posts on their social media claiming that tenants will now have to pay 18 % Goods and Services Tax (GST) under the revised GST rates by the GST Council. The claims panicked all the tenants.
Not All Tenants Have To Pay 18% GST On Rent
Take a sigh of relief because not all tenants have to pay 18% GST on rent. If you have rented the place for personal use, then you are not obligated to pay the Goods and Services Tax on rent. Even if a proprietor or a partner of a firm is renting a property for personal use, no GST will be applicable.
Who Will Have To Pay 18% GST On Rent?
Only GST- registered tenants will have to pay the 18% GST on rent. The levy is applicable when the residential property is given on rent to business entities.
“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 percent GST on such rent paid to the owner,” said Archit Gupta, founder and CEO of ClearTax.
The government clarified that only individuals who have registered themselves as businesses under GST will be liable to pay the 18 percent tax, which they can claim deductions under Input Tax Credit while filing for GST returns, under the reverse charge mechanism (RCM). The tenant will pay the tax directly to the government.
Prior to July 18, GST was only levied on the rent of a commercial property. From 18th July 2022, GST shall be charged if such residence is rented or leased by a GST-registered person/entity who offered services from the rented property.
This article is written by Varsha. You can reach out to the author via email at firstname.lastname@example.org.