GST On Rent: If you live in a rented house and are GST registered, then Goods and Services Tax of 18 per cent will be levied on the rent. Despite being GST registered, if you live in that house with your family, then GST will not be applicable.
GST On Rent: In the month of July, the government announced to levy 18 percent GST on rented house. In such a situation, now the question arises that the rented house in which you live, will now be taxed on it too? In fact, in the 47th meeting of the GST Council, it was decided to impose 18 percent GST on rent. This decision was implemented on 18 July. Tax experts say that ordinary people will not have to pay tax on rent. Such tenants who use the rented house for their business purposes will have to pay GST.
Tax was not levied on residential property till July 17
Chirag Chauhan, tax expert of CA Chauhan & Co Chartered Accountants, said that till July 17, 2022, no tax was levied on the rent of the residential property. Earlier it did not matter whether the tenant or the landlord was registered in GST or not. The rules changed from 18 July. According to the new rule, if a tenant of a residential property is GST registered, he will have to pay GAT of 18 per cent on the rent. This tax will be implemented under reverse charge mechanism.
GST registered, but personal use will not be taxed
Tax expert Chouhan said that it is important to understand the specifics of the rules implemented by the government. Under the reverse charge mechanism, if the transactions are done for business purposes, then in such cases GST will be applicable and the tenant will be charged GST of 18 per cent on the rent. GST is not applicable if the rental space is used for personal purposes.
Understand this case with example
Now let us understand this matter with an example. Chartered Accountant Chirag Chauhan said that if a professional like a content creator, chartered accountant, lawyer, who is GST registered and lives with his family in that rented house, then in such cases GST will not be levied on the rent. This is because he is making personal use of the rented house. However, that business is not getting the benefit of claim on that rent in ITR return. In this case, if he avails of deduction in income tax return on rent, then he will have to deposit GST of 18 per cent.
When will GST not be applicable?
- If the tenant is not GST registered then he will not have to pay GST of 18 per cent.
- If the tenant is GST registered, but he is making personal use of the residential property, then GST will not be applicable.
- If the tenant is GST registered and is using the business of residential property, then he will have to deposit GST of 18 percent on the rent. In this case, he can also avail tax benefit on rent.
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