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GST on rental income

Renting immovable property in India is a taxable service and would attract GST @18%. However, there are certain exceptions, exemptions, and confusion related to GST for rental income that provoked you to find this post. In this article, GST provisions applicable on rental income from shop, office, or residence are explained. Hope you will enjoy reading this.

Renting of residential property

As per entry no. 12 of exemption notification no. 12/2017 dated 28.06.2017, services by way of renting of residential dwelling for use as a residence are exempted from GST levy. However, this exemption notification shall not apply to renting residential dwelling for business purposes. Hence, a person has to pay GST on rental income from residential dwelling only if,

(i) He is required to take GST registration, and

(ii) Property is given on rent for commercial purposes.

Illustration -

  • Residential property is given on rent to OYO for use as a hotel – Such transaction will not be eligible for exemption and thereby taxable.
  • Residential property is given on rent partly for commercial purpose and partly for residential purpose – Such transaction will be taxable.

Renting of commercial property

Rent received from commercial property came under the Goods & Services Tax purview and would attract GST at the rate of 18%. Hence, if earning of a commercial property owner exceeds the exemption threshold, he will have to register under Goods & Services Tax and pay taxes.

Renting of precincts of a religious trust or charitable trust

The rental income of the registered charitable trust or religious trust from a religious place meant for the public is taxable at nil rated.

But the rental income of a religious trust or charitable trust will be taxable at 18% in the following cases-

(i) The room is given on rent for Rs.1000 per day or more.

(ii) Shops and other spaces for business is given on rent for Rs 10,000 per day or more

(iii) Community hall or any open area is given on rent for Rs 10,000 per day or more.

SAC code for rental or leasing services

 

SAC CODE

Description

9972

Real estate services

997211

Real estate services involving owned or leased property

997212

Rental or leasing services involving own or leased non-residential property

 

What are registration provisions in GST for rental income?

It is mandatory for every person in India to register for GST if,-

GST exemption limit for service providers is Rs.20 lakhs. While computing exemption limit, rental income from all property including other taxable supply would be counted. Accordingly, it is necessary for the landlord of the property to have a GST number if his rental income with other taxable supplies exceeds Rs 20 lakhs.

While applying for GST online, the owner of the property is required to upload a soft copy of the following documents on the Common portal -

  • PAN card of the landlord
  • Aadhaar card of the landlord
  • Canceled cheque copy/ latest bank statement copy
  • Address proof.

How GST will be computed on rental income?

The computation of GST on rent depends on whether a supply is interstate or interstate.

Intra-state supply

  • Place of supply ( location of immovable property) and location of the supplier (location of landlord) is in the same state.
  • CGST@9% and SGST @9% would be applicable
  • For example, a property owner is registered in Delhi, and he renting out his property situated in Shimla for Rs 300,000 per month. Compute GST and total invoice amount.

Monthly rental income

300,000

CGST (9%)

27,000

SGST (9%)

27,000

Total amount to be charged in tax invoice

354,000

 

Inter-state supply

  • Place of supply (location of immovable property) and location of the supplier (location of landlord) is not in the same state.
  • IGST @18% would be applicable
  • If the property owner and property is located in the same state and rental income from the property is Rs 300,000. Compute GST and total invoice amount.

Monthly rental income

300,000

IGST (18%)

54,000

Total amount to be charged in tax invoice

354,000

 

GST composition scheme

A composition scheme is an optional scheme of levy of tax available for small taxpayers in the GST regime. Earlier, the scheme was available to only the suppliers of goods. However, notification no 2/2019-Central Tax (Rate) notified the composition scheme for the supplier of service also from 1 April 2019. Under this scheme, tax is levied at a reduced rate with fewer GST compliances.

Service providers having an annual turnover of less than Rs 50 lakhs can opt for a composition scheme in GST. Landlord opting for a composition scheme is required to pay GST at a rate of 6% subject to certain conditions & restrictions.

Whether GST paid on rent can be claimed as an input tax credit?

A tenant can claim credit of GST paid on rent while paying tax dues if he fulfills all conditions of section 16 of the CGST act. Conditions to claim GST credit is given below-

(i) Possession of GST complaint invoice or debit note issued by the landlord

(ii) Service received

(iii) Relevant GST returns have filed

(iv) GST has been deposited by the landlord to the Government

Relevant case laws

 

Case

Order Date

Decision

In re Midcon Polymers (P.) Ltd. ( AAAR Karnataka)

11th January 2021

1. For the purpose of arriving at the value of rental income, the Appellant cannot deduct the amount paid as property tax to the Municipal Authority or any other statutory levies levied under any law for the time being in force, other than the CGST, SGST, IGST and Compensation Cess, subject to the condition that it is charged separately by the Appellant.

2. For the purpose of arriving at the total rental income, the notional interest earned on the security deposit is not to be taken into consideration.

In re Rabi Sankar Tah (AAR West Bengal)

21st October 2019

The Applicant and the other two co-owners cannot be treated as an association of persons and, therefore, as a person defined under section 2(84)(f) of the GST Act, where their income from renting is separately ascertainable and assessed for income tax individually at the hand of each co-owner.

Whether the Applicant is required to be registered under section 22(1) of the GST Act will, therefore, depend on his gross turnover, ascertained separately from the other co-owners, exceeding the threshold as provided under the Act.

Frequently asked questions (FAQs)

GST will be payable at the time of receipt of rent or within 30 days from the date of service, whichever is earlier.

Yes, the broker will collect GST from the landlord by raising the tax invoice.

The landlord will collect the GST from the tenant and deposit it to Government.


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CA Anand Singh

CA Anand Singh

I am a practising Chartered Accountant with 6 years of experience in Direct and Indirect Taxation, FEMA, Corporate Law and Audit etc.