Implication of GST on Rent of Immovable Properties in India

GST or Goods and Services Tax is an indirect tax that has replaced several other taxes such as Value Added Tax (VAT), Excise Duty, Service Tax, etc. The implementation of GST in India has been a significant change in the tax regime. It has impacted the way businesses operate and has brought in several changes to the way taxes are levied on various goods and services.

The GST Council has classified goods and services into five different tax slabs, namely 0%, 5%, 12%, 18%, and 28%. However, certain goods and services are exempted from GST. One such service is the rent of immovable properties. Let us understand the GST implications on rent of immovable properties.

What is the Rent of Immovable Properties?

The rent of immovable properties is the amount paid by the tenant to the landlord for allowing him to use the property temporarily. Immovable properties may include land, buildings, or other structures that are permanently attached to the ground. Renting of immovable properties is a common practice in India, and it includes both commercial and residential rental properties.

GST on Rent of Immovable Properties

As per the GST Act, renting of immovable properties is exempted from GST. This exemption is provided under the GST Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017. The notification states that the following services are exempted from GST:

Services by way of renting of residential dwelling for use as a residence
Services by way of renting of a building for commercial purposes

However, there are certain conditions that the landlord needs to comply with to avail of this exemption. These are as follows:

The landlord should not be registered under GST
The landlord should not charge GST on the rent
The landlord should not claim any input tax credit on GST paid on goods and services used for the construction, repair, or maintenance of the property

Impact of GST on Rent of Immovable Properties

The exemption of GST on rent of immovable properties has brought in several changes to the tax regime. Previously, the landlords were liable to pay Service Tax on the rent of commercial properties. However, with the implementation of GST, the Service Tax has been replaced by GST, and it is exempted for renting of commercial or residential properties.

Moreover, the exemption of GST on renting of immovable properties has reduced the tax burden on the landlords. They do not need to register under GST nor do they need to file GST returns. However, if the landlord provides any other services apart from renting of immovable properties, then he may need to register under GST and comply with the GST provisions.

Conclusion

The GST implication on rent of immovable properties is that it is exempted from GST. The landlords do not need to pay any GST on the rent received nor do they need to register under GST. However, they need to comply with the conditions mentioned above to avail of this exemption. The exemption of GST on rent of immovable properties has reduced the tax burden on the landlords and has brought in several changes to the tax regime.