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Published on:
February 20, 2023
By
Paramita

Taxability of Renting of Residential Dwelling Under GST

As a small or medium business owner, understanding the tax implications of renting a residential property is crucial. In India, the Goods and Services Tax (GST) has changed the rules for leasing and renting a property. In this article, we will be discussing the taxability of renting of residential dwelling under GST.

What is GST?

GST is a comprehensive indirect tax levied on the manufacture, sale, and consumption of goods and services throughout India. It replaced multiple taxes levied by the central and state governments. GST is levied in three types, i.e., Central GST, State GST, and Integrated GST.

What is a Residential Dwelling?

A residential dwelling is a property used for residential purposes, i.e., for living, sleeping, cooking, etc. It includes houses, flats, apartments, etc.

What is the Taxability of Renting of Residential Dwelling?

Under GST, the renting or leasing of residential dwelling for residential purposes is exempted from GST. However, if the property is rented for commercial purposes, then it is taxable under GST.

For instance, if a house is rented to a family for residential purposes, then it is exempt from GST. But if the same house is rented to a business for commercial purposes like an office, then GST will be levied on the rent amount.

What is the Rate of GST on Renting of Residential Property?

As mentioned earlier, renting of a residential property for residential purposes is exempt from GST. However, if the property is rented for commercial purposes, then GST will be levied. The rate of GST on renting of commercial property is 18% (9% CGST + 9% SGST/UTGST).

Can Landlords Avail Input Tax Credit?

Input tax credit is a crucial benefit under GST, which allows taxpayers to reduce their overall tax liability. However, landlords cannot avail of input tax credit on the taxes paid on the purchase or construction of the residential dwelling. This is because the renting of a residential property for residential purposes is exempt from GST.

Conclusion

The taxability of renting of residential dwelling under GST is quite straightforward. Renting a residential property for residential purposes is exempt from GST, whereas renting a property for commercial purposes is taxable under GST. It is crucial for small and medium business owners to understand the tax implications of renting a property to avoid any tax-related issues or disputes in the future.

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Updated on:
March 16, 2024