Are you looking for information on GST on renting residential immovable property? Then, this article explores various aspects related to it.

Per the GST Act, renting out an immovable property would be considered a supply of services. But GST is applicable only to particular rent types, including,

  • When a property is given on rent, lease, easement, or licensed to occupy.
  • When any property like an industrial, commercial or residential property is leased out to a business partially or wholly.

Such a renting is considered goods supply. Hence, it would attract tax. When you provide a property for residential reasons, it is exempt from GST. But any other type of renting or leasing out of an immovable property for the business purpose would attract 18% GST. That’s because it would be considered a supply of service.

Who Should Register if the Property is Rented Out to Business?

Taxpayers earning beyond the exempted threshold should register under GST and pay taxes. So, if you have provided property to a business, then it is taxable. If you are earning income from a business, such as rent and any other exempted income of over INR 20 lakh annually, you should register yourself under GST.

The threshold limit for GST applicability for those providing only services is INR 20 lakh yearly, beyond the service tax limit of INR 10 lakh. Thus, landlords covered under the Service Tax regime will be relieved up to another INR 10 lakh earned.

GST Treatment of Properties Rented Out for Commercial Reasons

For commercial properties on rent, GST will be applicable at 18% on the taxable value, and rent would be considered a taxable supply of service. If a registered religious trust or charitable trust owns and manages a religious place for the public, it will be exempt from GST.

  • The room rent is less than INR 1,000 daily
  • The space rent for business is less than INR 10,000 monthly
  • The community hall or open area rent is less than INR 10,000 daily

How to Calculate GST on Rented Out Properties?

For commercial spaces given on rent, GST is calculated and charged on the total rent amount to be collected periodically. When an invoice is generated every period, the GST (9% CGST and SGST or 18% IGST) will be calculated on payable rent.

ITC Provisions When GST is Levied on Rent

People paying GST on rent can usually take credit for the tax paid to pay their other taxes. If all provisions to claim input tax credit are fulfilled, the taxpayer can claim ITC on the GST paid on rent.

Provision for a Tax Deduction on Income Tax for the Rented Property

The owner of the rented property has to collect GST from the rent payer on the rent. The rent payer has to deduct income tax at source at 10% if the property rent is beyond INR 2.40 lakh annually from AY 20-21. TDS will be applicable to residential and commercial properties. GST will not be charged on TDS.

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