Important changes have been made in the rules of GST by the Ministry of Finance, which will be effective from July 18. Under this, 18% tax has also been levied on rent, i.e. tenants living on rent of residential property will have to pay 18% GST along with the rent. However, this rule will be applicable only to those tenants who are registered under GST for business. Such people will have to pay 18 percent tax along with the rent of the house.
Earlier, GST was applicable only on rent or lease of commercial properties such as office or retail space, whereas there was no GST on rent or lease of residential properties by corporate houses or individuals. At the same time, as per the new rules of GST, a GST-registered tenant will be liable to pay tax under the Reverse Charge Mechanism (RCM). The tenant can claim the GST paid under Input Tax Credit as a deduction.
Under the new rule, it has been told that this tax will be applicable only if the tenant is registered under GST and is liable to file GST return. The owner of a residential property does not come under the purview of paying GST. It has also been clarified in this rule that if a common salaried person has taken a residential house or flat on rent or lease, then he will not have to pay GST.
What is the limit for which business?
Under the GST law, registered persons include individuals and corporate entities. When a person carries on business or profession, which reaches an annual turnover of more than the annual turnover, then GST registration is mandatory. The limit under the GST law varies with the nature and place of supply. The limit for a registered person supplying services alone in a financial year is up to Rs 20 lakh. At the same time, a limit of Rs 40 lakh has been kept for those doing business of goods transactions. However, if the registered entity is located in any of the North Eastern States or Special Category States, the limit is Rs 10 lakh per financial year.
who will be affected
The new changes, implemented after the 47th meeting of the GST Council, will have an impact on companies and professionals who have taken residential properties on rent or lease. Rent paid by companies for rented housing properties to be used as guest houses or accommodation for employees will now attract 18 per cent GST. This will increase the cost of staff for companies that are offering free accommodation to employees.