GST on Renting a Residential Property

Renting of properties by the owners are common these days. Renting can be either for residential purpose or commercial purpose. As the rent comes under services GST is applicable on Renting of properties. Know more on the latest changes.

This document covers

Taxes on Renting a Property
Upto 17th Jul 2022
W.e.f 18th Jul 2022
Exception from Jan 1st 2023

1. Taxes on Renting a Property

The income from the residential property rent is subject to taxes.
All along such income is considered under income from let-out property of income tax. Appropriate TDS to be deducted by the tenant and file TDS return if the total rental income is more than Rs. 2,40,000 per year or rent more than Rs. 50,000 per month.
GST on renting of residential property introduced in Jul 2022. This document covers in detail.

2. Upto 17th Jul 2022

Renting of residential properties for residential purposes is exempted from GST. GST is exempted on residential purpose irrespective of whether the landlord or tenant is registered or unregistered under GST.
However Renting of residential property for commercial purpose comes under GST and applicable GST rate is 18%. The landlord needs to get registered under GST if his threshold exceeds Rs 20 lakhs/10 lakhs depending on the state.

Learn more on how rental income is considered under Income Tax at Renting of Residential Property

3. W.e.f 18th Jul 2022

The rules regarding renting of residential property have been amended w.e.f 18th Jul 2022 as per 47th GST council meeting. W.e.f 18th Jul 2022, GST is applicable on renting of residential properties for residential use to a registered person.
GST is payable on Reverse Charge Mechanism (RCM) on renting of residential property for residential purpose to a registered person

S.No	Landlord under GST	Tenant under GST	Applicability of GST
1	Unregistered	Unregistered	Not Applicable
2	Registered	Unregistered	Not Applicable
3	Unregistered	Registered	GST @ 18%. Payable by Tenant under reverse charge mechanism
4	Registered	Registered	GST @ 18%. Payable by Tenant under reverse charge mechanism

4. Exception from Jan 1st 2023

CBIC has issued an explanation on renting of residential property w.e.f 01st Jan 2023. If the proprietor of sole Proprietorship registered under GST takes a residential property on rent for residential purpose in his personal capacity, GST is not applicable w.e.f 01st Jan 2023

EXAMPLES

Example 1 :
Bala private limited which is registered under GST has taken a residential apartment for its employees towards residential purpose from Mr Ram who is a unregistered person.

In this case, Bala private limited needs to pay GST @ 18% on rent on reverse charge basis w.e.f 18th Jul 2022

Example 2:
Mr Krishna is a proprietor of Krishna enterprises which is registered under GST. He rented out a residential building for his family residential purpose in his personal capacity from 01/04/2022 to 31/03/2023. He is paying a rent of Rs 10000 per month for his residential purpose.

From 01st Apr 2022 to 17th Jul 2022: GST is not applicable as it is for residential purpose
From 17th Jul 2022 to 31st Dec 2022: GST is applicable @ 18% and he is liable to pay GST @ 18% on RCM basis
From 01st Jan 2023 to 31st Mar 2023: GST is not applicable as he has taken the residential property in his personal capacity for his residential purpose (per above exception rule)