GST APPLICABILITY  ON RENTAL INCOME

The impact of GST has also on the real estate sector and its various aspects like sale, purchase, rent, lease, etc. important from the point of view of GST law purpose.

Many various provisions are laid down for regulating GST on the rental income like a place of supply, taxable services under GST, exception limits etc.
in rental income, the GST value is the number of rents received from an individual's commercial properties. commercial rents received more than Rs. 20 lacs a year charged by GST. However commercial rents less than Rs. 20 lacs a year shall not charge by GST.

Renting out property attracts GST

Renting out of an immovable property would be treated as a supply of service. GST will apply to a certain type of rent such as lease, easement, rent, or licensed to occupy.

When a property is leased out for industrial, commercial, or residential property for business (maybe partly or wholly), these types are considered a supply of service that would attract tax.

Residual house – there is no tax on income earned from renting the residual house. the owner is exempt from paying tax on income from houses which has given for rent.

Commercial properties – GST on income from rent of commercial property will be charged only if the threshold limit exceeds Rs.20 lakhs per year.

• GST is calculated at an 18% rate from the rent of taxable properties.
• Rs. 10,000 or less per month for shop and other business space.
• Rs. 10,000 or less per day for a community hall or an open area.
• Properties of any charitable trust, religious trust and is managed by them, such areas are exempted from GST. GST is applicable on them only if such renting area cost is more than Rs. 1000 per day.

BEFORE GST POSITION

a Service Tax registration is needed to obtain by landlords before coming to GST if their total taxable service is exceeding Rs. 10 lacs per year. As long as rental income does not beat Rs 10 lacs per year, the landlord would not be captivated by service tax.
commercial property alone that is let-out would attract Service Tax. if the residential property is used for commercial purposes then Service Tax was imposed @ 15% of the rent for commercial property.
 
ITC ON RENT OF GST

 the person paying tax on rental income can take credit from this tax paid against the GST that he is required to pay. If all the provisions to claim input tax credit are fulfilled then input tax credit on GST paid can be claimed.

TDS ON RENT

 the person paying the tax needs to deduct tax at the source at the time of paying the rent to the owner under the income tax act,1961. TDS is deducted on rent exceeding Rs. 2.4 lakh annually.

10% TDS is applicable to the amount of rent from both residential wells as commercial property. TDS are applicable both to residential & commercial property. TDS will not be applicable if there will be no GST.

Reverse charge Applicability 

if GST charged by the government or local authority to the registered person on the rent for immovable properties will come under reverse charge operation. But when the property is rented to an unregistered person, the government will deduct the GST.

FAQ on GST ON RENTAL INCOME

Q1- Who will pay the GST on rent?

Ans.- the landlord or owner of property given on rent needs to collect GST from the tenant or person paying rent and pay. The amount of GST shall be on the rent charged.

 

Q2- is reverse charge applicable on rent?

Ans.- reverse charge on renting of immovable property is applicable only in the case where renting services are given by Central or State Government to a registered person

 

Q3- Is GST is charged on advance rent?

Ans.- it means that if the advance is received before issuing of invoice therefore time of supply would be the date of receipt of advance. So, taxpayers on advance received must pay GST.

Last updated 2 years ago