New Delhi: The government said Friday that GST will not be applicable on residential units if they are rented out to private persons for personal use. The government dismissed media reports which claimed that there is an 18 per cent Goods and Services Tax (GST) on house rent paid by tenants. In a tweet, the government said GST would be levied only when the residential unit is rented out to a business entity.
“No GST when it is rented to private person for personal use. No GST even if proprietor or partner of firm rents residence for personal use,” the government said.
‘KPMG in India Partner Indirect Tax’ Abhishek Jain said the clarification provides relief to GST-registered proprietors or partners in GST-registered firms who take on rent immovable property for their personal use such as renting of a house for family accommodation.
Earlier, only commercial properties like offices or retail spaces given on rent or lease attracted GST. There was no GST on rent or lease of residential properties by corporate houses or individuals.
The new rules of the government state that, a GST-registered tenant will be liable to pay the tax under the reverse charge mechanism (RCM). The tenant can claim the GST paid under ‘Input Tax Credit’ as a deduction.
The tax will only apply when the tenant is registered under GST and liable to file GST returns. The owner of the property is not liable to pay the GST.
“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,” as per a report in the ‘Mint’.