Now if you are a registered under gst and have let out your property for commercial purpose then you are required to pay gst on such rental income. Because from 1st october 2024, GST (Goods and Service Tax) is applicable on renting of immovable property at the rate of 18% as renting of immovable property shall be considered as supply under gst.
Applicability of gst on renting of immovable property is generally based on end use of property by tenant (service recipient). Genarally, if property is used by tenant for commercial purpose then gst is applicable and if same is used for residential purpose then gst is exempt subject to few exceptions. lets understand levy of gst in different situation if-
Rented property is used for commercial purpose, then
a) if service provider (land lord) is registerd person and service recipient (tenant) is unregisterd person, then gst is applicable and service provider is liable to pay gst.
b) if service provider is registerd person and service recipient is also a registerd person, then gst is applicable and here service provider is liable to pay gst.
c) if service provider is unregistered person and service recipient is also an unregisterd person, then gst is not applicable as gst is exempt on such transection.
d) if service provider is unregistered person and service recipient is registerd person, then gst is applicable and service recipient is liable to pay gst under RCM(Reverse Charge Machanism).
Rented property is used for residential purpose,then
a) if service provider is registerd person and service recipient is unregisterd person, then gst is exempt.
b) if service provider is unregistered person and service recipient is unregisterd person, then gst is exempt.
c) if service provider is registerd or an unregistered person and service recipient is a registerd person and property used for residential purpose of individual and expense of such rent is not claimed as expense in business and profession, then GST is exempt.
d) if service provider is registerd/ unregistered person and service recipient is a registerd person and property used for residential purpose of individual,director or any employee and expense of such rent is claimed as expense in business or profession, then GST is applicable and service recipient is liable to pay gst under RCM.
So here it is to be understand that levy of gst is depend upon end use of property by the tenant. If tenant is using the property for commercial purpose then gst shall be levied and if using it for residential purpose and not claiming such rent expense as business expenditure then gst is exempt.
Common FAQs on gst on rent:
What is the rate of GST on rent?
GST rate on rent is 18% on monthly rent.
Do I still have to pay GST, if I am not registered in GST?
No, if you are not registered in GST and your annual rental income is less than 20 Lakh, then you are not required to GST untill your annual rental income exceeds 20 lac in a financial year.
Do i have to pay gst on rent in addition to monthly rent?
Yes, you have to pay gst on rent in addition to monthly rent. for example if you are paying Rs.2 lac rent per month so now you have to gst at the rate of 18% on Rs.2 lac. which is Rs. 36000. Hence your total monthly cash outflow now shall be Rs.2,36,000 per month.
Can I claim ITC of gst rent?
Yes , you can claim ITC ( input tax credit ) of gst rent.
When I have to pay gst on rent?
You have to pay gst only when you are registered under gst and your property is used for commercial purpose by tenant. here both conditions have to satisfy.
If you are tenant and registered under gst and using it for commercial purpose and your landlord is not unregistered under gst then you are required to pay gst on rent under RCM.
Who is required to pay gst on rent?
Genarally Land lord is required to pay gst on rent. However he will collect amount of gst from tenant and will pay to the government. Here tenant will transfer both the amount to landlord i.e amount of rent and gst on such rent.
But if RCM is applicable, in such case tenant will pay gst on his own account to the government. In such case he will pay to the land lord only the amount of rent and will pay gst amount to the government.
Do I still need to pay gston rent if I am registered in gst but I am using the property for residencial purpose?
No, gst is not applicable if property is used for residential purpose. It is immaterial whether you ( tenant) are registered under gst or not. But if you are registered under gst, you should not claim such rent as business expenditure in books of accounts. If you calim such rent as business expenditur then GST shall be applicable as it would considered that property used for commercial purpose.
Do I have to pay gst on rent, if I am using property for residential purpose for my employees or directors?
Yes, although you are using property for residential purpose of your employees but still you have to pay gst on rent. Because it is considered that you are using it for business purpose as you would claim such rent as business expenditure in your books of accounts.