New GST Rule on House Rent: (Check Full Details)

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GST on residential properties:

The goods and services tax (GST), is currently under discussion. A salaried individual must pay GST for home rent.

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Tax experts say that GST was not applicable to the rent of commercial properties until 17 July 2022.

However, GST will be applied from 18 July 2022 to residences rented or leased out by GST-registered persons.

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The 47th GST Council meeting recommended that the tenant pay 18% GST on a reverse-charge basis (RCM).

They can still claim this amount as a deduction, even though they have to pay GST tax on the sales.

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Mahesh Jaising (Partner, Leader – Indirect Tax at Deloitte India) stated that GST on residential property rent is exempt from tax regardless of tenant status.

Whether the service provider is registered or not. This exempted all residential property rentals.

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However, w.e.f. However, tenants who are registered will be subject to GST for renting residential property under the reverse charge mechanism.

Mahesh Jaising continued by saying that no tax is due to the landlord regardless of whether the tenant is registered.

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Only one change has occurred: a registered tenant will no longer be eligible for the GST exemption on residential dwellings. These tenants will have to pay the tax under RCM.

Archit Gupta (Clear’s founder and CEO) said that if a common salaried individual has taken a residence on rent or lease, they don’t have to pay GST.

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GST-registered persons who are engaged in business or professions must pay 18% GST on rents paid to the owners.

These persons are eligible for the input tax credit of GST paid towards residential rent or lease.

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The update clarifies that “Persons” includes both individuals and corporate entities.

GST registration is required for any person who has a business or profession that generates more than the GST law’s threshold limit.

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The limit varies depending on the supply type and the state or UT in which the principal place of supply is.

The limit is Rs20 lakh per fiscal year if the individual supplies only services. For suppliers of goods only, the limit is Rs40 million.

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The limit for a supplier of only goods is Rs40 lakh if it is obtained from Northeastern or Special Category States.”

Archit Gupta, Clear, said that while you can’t claim the input credit on rental expenses, you might still need to pay GST on rent.

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Mahesh Jaising spoke out about the GST rule change. “The change will affect corporate houses and taxpayers that have taken residential units for rent for their employees.

These registered taxpayers will have to pay GST under reverse charge. This can impact the P&L as the department has the power to dispute credit eligibility and treat the credit as if it were for personal consumption.

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Industry should carefully examine this credit eligibility.

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