The federal government has clarified on the brand new GST or items and providers tax guidelines on lease, which got here into impact from 18th July. In a tweet, PIB stated that “renting of residential unit taxable solely when it’s rented to enterprise entity️.” It additional clarified that “no GST when it’s rented to personal particular person for private use; no GST even when proprietor or companion of agency rents residence for private use.”
In line with tax consultants, till seventeenth July 2022, GST was relevant on the lease of a industrial property however from 18th July 2022, GST shall be charged if such residence is rented or leased by a GST-registered particular person/entity. As really useful on the forty seventh GST Council assembly, the tenant ought to pay 18 per cent GST on a reverse cost foundation (RCM). Nonetheless, they’ll declare this worth as a deduction whereas they pay tax on gross sales in GST returns.
Mahesh Jaising, Associate, Chief – Oblique Tax at Deloitte India stated, “Renting of residential dwellings as much as seventeenth July 2022 was exempt whatever the standing of the tenant i.e. whether or not the service supplier or service recipient is registered or unregistered. This meant that renting of property for residential functions was exempt for all. Nonetheless, w.e.f. 18th July 2022, a tenant who’s GST-registered will grow to be liable to GST on renting for residential functions beneath the reverse cost mechanism.”
Mahesh Jaising went on so as to add that there isn’t a tax that’s required to be discharge by the owner whether or not the tenant is registered or not. The one change that has been led to is {that a} tenant who’s GST-registered will not be capable to declare the advantage of exemption from GST on residential dwellings. Tax will should be discharged by such tenants beneath RCM.
Archit Gupta, Founder and CEO at Clear stated, “If any widespread salaried particular person has taken a residential home or flat on lease or lease, they don’t have to pay GST. Nonetheless, a GST-registered particular person/entity who carries out enterprise or occupation should incur 18 per cent GST on such lease paid to the proprietor. They will declare the enter tax credit score on the GST paid in direction of lease or lease on residential property.”
As per the replace, ‘Individuals’ embrace people in addition to company entities. GST registration is required when any particular person carries on enterprise or occupation and makes an annual turnover greater than the edge restrict outlined beneath the GST regulation.
“The restrict varies based on the character of provide and state or UT the place the principal place of provide is positioned. If the particular person provides providers alone, ₹20 lakh per monetary yr is the restrict. The restrict is ₹40 lakh for a provider of solely items. Nonetheless, if registration is obtained from northeastern or particular class states, the restrict is lowered to ₹10 lakh,” stated Archit Gupta, including, “If you’re registered as a composition taxable particular person, you can’t declare the enter tax credit score on rental bills however would possibly nonetheless should pay GST on lease on a reverse cost foundation.”
Talking on this GST rule change, Mahesh Jaising stated, “The change will influence company homes who’ve taken residential items on lease for his or her workers. GST will now be required to be paid by such registered taxpayers beneath reverse cost and might influence on the P&L, because the division can dispute the eligibility of credit score, treating the identical as used for private consumption. This credit score eligibility ought to be examined fastidiously by business.”
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