GST On House Rent: Do All Tenants Have To Pay 18% GST?

One of the most significant changes was that a GST-registered tenant must pay Goods and Services Tax at the rate of 18% when renting a residential property.

Earlier Regime

Before June 18, 2022, the residential property was not subjected to any kind of taxes, irrespective of the fact that the landlord or tenant was GST registered or not.

GST On Commercial Property

The GST is applicable on commercial property, which will remain so even after June 18, 2022. The GST is applicable on commercial property when the landlord is GST-registered. It is mandatory for a landlord to register for the GST when his turnover is more than Rs.20 lakhs in the case of supply of services and more than Rs.40 lakhs in the case of supply of goods.

If the landlord is GST-registered and rents the commercial property, then the landlord will charge the tenant 18% GST irrespective of whether the tenant is GST-registered or not.

GST On Residential Property

As per the new rules w.e.f. June 18, 2022, if the tenant of the residential property is GST-registered, he has to pay 18% GST irrespective of the fact that the landlord is GST-registered or not. The payment of the GST shall be made under the reverse charge mechanism (RCM), which means that the tenant shall directly pay the GST to the government.

Impact

The new rule will have an effect on GST-registered tenants. For example, if a company takes a guesthouse on rent or if a company takes a residential property on rent for the sake of its employees, then the company has to pay 18% GST. However, if the employee directly takes a residential property on rent, he is not liable to pay GST.

GST Is Payable By Tenants on Residential Property

Tenants who are GST registered must pay GST when renting a residential property. The tenants registered under GST may include companies; small businesses doing business in residential property; online content creators who shoot videos, etc.; and business professionals like CAs, lawyers, architects, and business consultants.

Cases In Which GST Is Not Payable By Tenants On Residential Property

1. Tenants who are not GST registered are not required to pay GST when renting a residential property.
2. The salaried class person is not required to pay GST when renting a residential property.