Taking house on rent? Will you have to pay 18% GST? Govt clarifies

18% GST on house rent for tenants controversy: Here’s how Govt responded to misleading social media posts

18% GST on rent news
Is there 18% GST on house rent? Govt clarifies the truth

18% GST on house rent for tenants controversy: Responding to social media posts claiming that tenants would now have to pay 18% Goods and Services Tax (GST) on house rent, the Government’s official fact-checker today said such claims were misleading.

PIB Fact Check clarified on Twitter that there would be no GST when a house is rented to a private person for personal use. GST would also not apply even when the proprietor or partner of a firm wants to rent a residence for personal use.

However, renting of the residential unit will become taxable if the property is rented to a business entity.

“Renting of residential unit taxable only when it is rented to business entity. No GST when it is rented to private person for personal use. No GST even if proprietor or partner of firm rents residence for personal use,” PIB Fact Check tweeted from its official handle.

Also Read: Rent vs Buy calculation: Which is better?

The 47th GST Council meeting in June 2022 removed the exemption on renting residential dwellings to business entities (registered persons).

As per the new rule, a salaried person does not need to pay GST on rent if he/she rents a house for personal use.

Welcome clarification

Experts say that this is a welcome clarification from the Government as it will prevent unnecessary panic over GST on house rent. Further, the clarification provides relief to GST-registered proprietors or partners in GST-registered firms who take residential properties on rent for personal use.

” This is welcome clarification by the Government that will prevent unnecessary panic where people were under the false belief that residential renting of immovable property to unregistered persons would also attract GST. More importantly, this clarification provides the much-needed relief to GST-registered proprietors or partners in GST-registered firms who take on rent immovable property for their personal use, e.g. renting of a house for family accommodation, in which case the Government has rightly clarified that GST will not be applicable,”  Abhishek Jain, Partner, Indirect Tax at KPMG in India, said in a statement shared with media.

The new rule on GST came into effect on July 18.

Also Read: No GST on room rents of ‘sarais’ managed by religious or charitable trusts: CBIC

The Council had also recommended that hotel accommodation priced up to 1000/day would be taxed at 12%. Further, the GST on room rent (excluding ICU) exceeding Rs 5000 per day per patient charged by a hospital was capped at 5%. “Room rent (excluding ICU) exceeding Rs 5000 per day per patient charged by a hospital shall be taxed to the extent of amount charged for the room at 5% without ITC,” the Ministry of Finance had said in a statement.

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