GST on rental house : Tenants will have to pay 18% tax, know everything about the new rule

Under the new rules of GST or Goods and Services Tax, an important rule has come into force for the people living in the rented house. As per the GST rules that came into effect from July 18, tenants living on rental of residential property will have to pay 18 per cent GST along with the rent. However, this rule will be applicable only to those tenants who are registered under GST for a business.

According to the earlier rules, GST was levied on lease only when commercial property such as places like offices or retail spaces were taken on rent. No GST was levied on residential property whether taken on rent by a corporate house to a normal tenant.

According to the new rule, the GST registered tenant will have to pay tax under the reverse charge mechanism (RCM). He can claim GST by showing deduction under Input Tax Credit. Also, let us tell you that this 18 percent GST will be applicable only if the tenant is registered under GST and falls in the category of filing GST returns.

The tenant who runs his business by taking the residential property on rent will have to pay 18 percent tax. All general and corporate entities will come under the category of tenants registered under the GST law. It is mandatory for the business owner to get GST registration if the annual turnover reaches above the prescribed limit. What is the prescribed limit, it depends on the business. The annual limit for business owners providing services is Rs 20 lakh.

At the same time, for business owners selling or supplying goods, this limit is Rs 40 lakh. However, if this tenant resides in the North-Eastern states or a state with special status, then the prescribed limit of turnover for him is Rs 10 lakh per annum.