GST implication on rent of Immovable properties

Under the GST regime, renting of immovable property is classified as a taxable supply of services. However, the good news is that residential properties and certain other types of properties are exempt from GST, while the GST rate on commercial properties and other types of properties is 18%.

The exemptions under GST on the renting of immovable properties are as follows:

1. Residential properties: The renting of residential properties for residential purposes is exempt from GST. This includes renting of apartments, flats, and houses for residential purposes.

2. Vacant land: The renting of vacant land is exempt from GST.

3. Agricultural land: The renting of agricultural land is also exempt from GST.

4. Lodging services: The renting of rooms for residential or lodging purposes is exempt from GST if the tariff is less than Rs. 1,000 per day.

5. Educational institutions: The renting of immovable property to educational institutions for educational purposes is exempt from GST.

It is important to note that if the property is used for a commercial or industrial purpose, then it would be considered as a taxable supply of service and GST would be applicable at the rate of 18%. Additionally, if the annual rent paid for the property exceeds Rs. 20 lakhs, then the landlord is required to register under GST and collect and remit the tax to the government.

GST rate for commercial properties

As per the GST Act, the rental income received from commercial properties is subject to GST. The GST rate for rental income from commercial properties is 18%.

It is important to note that the GST rate is applicable only on the rental income received from the commercial properties and not on the sale of the property. In case of sale of commercial property, GST is not applicable. However, GST is applicable on the construction or sale of under-construction commercial properties.

Additionally, it is important to ensure that the commercial property is registered under GST and the landlord is filing the necessary GST returns in a timely manner to comply with the GST regulations.

GST applicable on leasehold properties

GST is applicable on leasehold properties based on the usage of the property. If the leasehold property is used for commercial or industrial purposes, then the lease rent received by the landlord is subject to GST.

The GST rate for lease rent received on commercial or industrial leasehold properties is 18%. However, if the leasehold property is used for residential purposes, then no GST is applicable on the lease rent received by the landlord.

It is important to note that if the leasehold property is partially used for commercial or industrial purposes and partially for residential purposes, then GST is applicable only on the portion of lease rent received for commercial or industrial usage. In such cases, the landlord is required to maintain proper records to identify the proportion of commercial and residential usage of the property.

Additionally, the landlord of a leasehold property that is subject to GST is required to register under GST and comply with the necessary GST regulations, including timely filing of GST returns.

Threshold limit for registration under GST for a landlord who rents out commercial properties

Since the rental of commercial properties is considered a business under GST, a landlord who rents out commercial properties is required to register under GST if their aggregate turnover exceeds the prescribed threshold limit.

As per the GST Act, the threshold limit for registration under GST is Rs. 20 lakhs in most states. However, some states have a lower threshold limit of Rs. 10 lakhs. Therefore, if the aggregate turnover of a landlord who rents out commercial properties exceeds the prescribed threshold limit in a financial year, they would be required to register under GST and comply with the GST provisions.

It is important to note that if a landlord operates in multiple states, they would be required to register under GST in each state if their aggregate turnover in that state exceeds the threshold limit.

FAQs

Here are some additional FAQs related to GST on the rent of immovable properties:

Q: What is the GST rate for commercial properties?

A: The GST rate for commercial properties and properties used for industrial purposes is 18%.

Q: Can a person claim input tax credit (ITC) for GST paid on renting of immovable property?

A: No, a person cannot claim ITC for GST paid on renting of immovable property, even if the property is used for a taxable business.

Q: Is GST applicable on the security deposit paid by the tenant?

A: No, GST is not applicable on the security deposit paid by the tenant to the landlord.

Q: If the landlord is an individual and has only one residential property for rent, is he/she required to register under GST?

A: No, if the landlord is an individual and has only one residential property for rent, he/she is not required to register under GST, even if the annual rent exceeds Rs. 20 lakhs. This is because the renting of a single residential property for residential purposes is exempt from GST.

Q: Is GST applicable on leasehold properties?

A: Yes, GST is applicable on leasehold properties, whether it is a commercial or residential property. The GST rate for commercial leasehold properties is 18%, while the renting of a single residential property for residential purposes is exempt from GST.

Q: What is the threshold limit for registration under GST for a landlord who rents out commercial properties?

A: If the annual rent paid for the property exceeds Rs. 20 lakhs, the landlord is required to register under GST and collect and remit the tax to the government.