All of these places—hotels, hospital beds, and now rent—are now taxed. According to new regulations, tenants must pay the goods and services tax (GST) at a rate of 18% when renting a residential unit. But is everyone to be treated by it?
According to the recommendations of the 47th GST Council meeting, a tenant is required to pay 18% GST on the rented residential property from July 18 of this year. Only tenants who are registered with the GST system are bound by it. However, under the reverse charge process, the tenant is responsible for paying the tax. As a result, they are able to deduct the value from their taxes as an input tax credit. In the past, only rented commercial properties like offices and retail stores were subject to GST. Rent or lease payments made by corporations or private individuals on residential premises were free of GST.
Abhishek Jain, partner at KPMG India, in a statement, said, “The new GST rule will increase the cost of every residential rent agreement where the transaction involves a registered person, such as a company or a corporate. The 18 percent additional cost on the rent could either be borne by the company or the landlord, depending upon the commercial arrangement thereof. Further, input tax credit in respect of such transactions may be sought…on the ground of the said services being for the personal use of the employees.”
A registered person under the GST law could be either an individual or a corporate entity. If a business or profession exceeds the threshold amount in annual turnover, this registration is required. The upper limit for a registered person offering services is Rs 20 lakh, and for a registered person providing goods, it is Rs 40 lakh. The cap is Rs 10 lakh each financial year, nevertheless, if the registered entity is situated in one of the northeastern or special category states.
The new set of rules applies to individuals or businesses that are GST-registered and provide services from rented residential properties. Corporate entities and taxpayers who have rented out homes or apartments for their employees will also be affected. For instance, lodging for guests or employee housing will be taxed. This will raise the price for businesses that provide free housing for workers.