New GST rule on house lease: Do you have to pay 18% tax?

GST on residential property: The items and companies tax (GST) is in consideration lately as to whether or not a salaried particular person ought to pay GST on residence lease. According to tax consultants, till seventeenth July 2022, GST was relevant on the lease of a industrial property however from 18th July 2022, GST shall be charged if such residence is rented or leased by a GST-registered individual. As advisable on the forty seventh GST Council assembly, the tenant ought to pay 18 per cent GST on a reverse cost foundation (RCM). However, they will declare this worth as a deduction whereas they pay tax on gross sales in GST returns.

On what rule says in regard to GST on lease of residential property, Mahesh Jaising, Partner, Leader – Indirect Tax at Deloitte India mentioned, “Renting of residential dwellings up to 17th July 2022 was exempt regardless of the status of the tenant i.e. whether the service provider or service recipient is registered or unregistered. This meant that renting of property for residential purposes was exempt for all. However, w.e.f. 18th July 2022, a tenant who is registered will become liable to GST on renting for residential purposes under the reverse charge mechanism.”

Mahesh Jaising went on to add that there isn’t any tax that’s required to be discharge by the owner whether or not the tenant is registered or unregistered. The solely change that has been led to is {that a} tenant who’s registered will not give you the option to declare the advantage of exemption from GST on residential dwellings. Tax will want to be discharged by such tenants below RCM.

Echoing with Deloitte India professional, Archit Gupta, Founder and CEO at Clear mentioned, “If any common salaried person has taken a residential house or flat on rent or lease, they do not have to pay GST. However, a GST-registered person who carries out business or profession must incur 18 per cent GST on such rent paid to the owner. Such persons can claim the input tax credit on the GST paid towards rent or lease on residential property.”

As per the replace, ‘Persons’ embrace people in addition to company entities. GST registration is required when any individual carries on enterprise or occupation and makes an annual turnover greater than the edge restrict outlined below the GST legislation.

“The limit varies according to the nature of supply and state or UT where the principal place of supply is located. If the person supplies services alone, 20 lakh per financial year is the limit. The limit is 40 lakh for a supplier of only goods. However, if registration is obtained from northeastern or special category states, the limit is lowered to 10 lakh,” mentioned Archit Gupta of Clear including, “If you are registered as a composition taxable individual, you can not declare the enter tax credit score on rental bills however may nonetheless have to pay GST on lease on a reverse cost foundation.”

Speaking on this GST rule change, Mahesh Jaising mentioned, “The change will impact corporate houses and taxpayers who have taken residential units on rent for their employees. GST will now be required to be paid by such registered taxpayers under reverse charge and can impact on the P&L, as the department can dispute the eligibility of credit, treating the same as used for personal consumption. This credit eligibility should be examined carefully by industry.”

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