No GST on house rentals – How GST is levied on renting of residential immovable property – A Complete guide

 

1.0 Introduction

There is large number of people in India whose source of earning is wholly dependent on rental income specially the aged people. Hence, it is very important for them to know the true impact of GST on house rentals and whether they need to register under GST or not.

As said, we all know that GST is going to impact the renting income as well, however certain classes  of rental income has been exempt from paying GST. Therefore, let us understand the whole concept in detail, so that you can remain complied and you don’t become liable for fines and penalties.

 

2.0 No GST on renting of residential property

As per GST law, any services by way of renting of residential dwelling for use as residence is exempt from payment of GST. To go into further deep, we must understand the concept behind and the two conditions on which this exemption depends.

The two conditions to claim exemption is that the property should be residential dwelling and has been rented for residential use. Here are the following cases in which exemption will go away and you shall become liable for GST payments:

• Residential dwelling rented for commercial purpose.
• Commercial property rented for any purpose.
• Residential property half rented for residential purpose and half for commercial purpose with single agreement.

Hence, make sure that you rent your house, home for residential use only to avoid GST payment and registration.

 

3.0 Impact of GST on PG rental income

The industry and need for PG is growing at a rapid pace as more and more people are migrating to cities for better opportunities. Hence, mostly people are building extra floors and then renting them to students, travelers against a monthly.

Since, they have the residential dwelling and they are renting it for residential use, therefore GST shall not be applicable.

 

4.0 How to make sure that tenant is using the property for residential use

It is not a rocket science to understand rather very simple techniques will save you from the glitches of GST. Just make sure you do not allow the following things in your property to avoid GST glitches:

• Make sure no local license like shop & establishment is taken on your address.
• No GST registration is taken by your tenant.
• No company registration is done on your address.
• Check if he is using your premises for business purposes.
• Check if he is using your property as a godown.

 

The above checks are only a example, you can do anything to check whether your tenant is using the property for residential use or commercial use.

 

5.0 GST impact when a single house/property is used for commercial and residential purpose with combined rent and agreement

If you try to create a bundled supply of services where a single agreement is drafted for commercial and residential use, then it shall be treated a mixed supply and rate of highest tax on that category shall be levied on complete transaction.

In other words, GST shall be applicable on whole of the rental income irrespective of whether it is being used for residential purpose and commercial purpose.

 

6.0 GST registration for earning rental income

If you are earning your complete income from rental income given for residential use, then GST shall not be applicable irrespective of the rental amount.

 

7.0 GST tax rate on rental income

If for any reason, GST becomes applicable on you, then the GST rate shall be 18%.

 

8.0 Conclusion

In case you have any query, kindly write to us at info@hubco.in.

 

Related Links:

• GST Registration
• GST Return Filings
• GST Software