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Feb 1, 2024

GST on Rent of the Residential and Commercial Property

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Vijay Sardhara

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GST, or Goods and Services Tax, is a tax levied on the supply of goods and services in India. It is a comprehensive, multi-stage, destination-based tax that has replaced many indirect taxes in India, such as VAT, service tax, excise duty, etc.

One of the services that is taxable under GST is the renting of immovable property. Renting of immovable property is considered a supply of service under GST, and hence, it is subject to GST at the rate of 18%.

However, not all renting of immovable property is taxable under GST. There are some exceptions and exemptions for GST on rent, depending on the type and use of the property.

GST on Rent of Residential Property

Renting of residential property is generally exempt from GST, except in some cases. Here are the conditions and exemptions for GST on rent of residential property:

  • GST is not applicable if a residential property is rented out to a registered person in their personal capacity and for use as their own residence. This means that if you rent out your house or flat to someone who is registered under GST, and they use it as their own residence, you do not have to charge GST on the rent. This exemption is based on the notification no. 12/2017-Central Tax (Rate) dated 28.06.2017.

  • GST is also not applicable if a residential property is rented out for residential purposes, irrespective of the status of the tenant. This means that if you rent out your house or flat to anyone for living purposes, you do not have to charge GST on the rent. This exemption is based on the notification no. 12/2017-Central Tax (Rate) dated 28.06.2017.

Here are some examples and scenarios to illustrate the different cases of GST on rent of residential property:

  • Example 1: Mr A owns a house in Ahmedabad. He rents it out to Mr B, who is a registered person under GST, for Rs. 20,000 per month. Mr B uses the house as his own residence. In this case, GST is not applicable on the rent, as it is exempt under notification no. 12/2017-Central Tax (Rate) dated 28.06.2017.

  • Example 2: Mr. C owns a flat in Mumbai. He rents it out to Mr D, who is an unregistered person, for Rs. 15,000 per month. Mr D uses the flat for living purposes. In this case, GST is not applicable on the rent, as it is exempt under notification no. 12/2017-Central Tax (Rate) dated 28.06.2017.

  • Example 3: Mr. E owns a bungalow in Delhi. He rents it out to Mr F, who is a registered person under GST, for Rs. 50,000 per month. Mr. F uses the bungalow for his business purposes, such as office, warehouse, etc. In this case, GST is applicable on the rent, as it is not exempt under notification no. 12/2017-Central Tax (Rate) dated 28.06.2017. Mr. E has to charge GST at the rate of 18% on the rent and pay it to the government.

GST on Rent of Commercial Property

Renting of commercial property is generally taxable under GST, except in some cases. Here are the conditions and rules for GST on rent of commercial property:

  • GST is applicable if a commercial, industrial, or residential property is rented out either wholly or partly for business purposes. This means that if you rent out your shop, office, factory, warehouse, or any other property for conducting any business activity, you have to charge GST on the rent at the rate of 18%. This rule is based on the notification no. 11/2017-Central Tax (Rate) dated 28.06.2017.

  • GST is also applicable if any property is rented out for conducting any event, conference, exhibition, etc. This means that if you rent out your hall, auditorium, stadium, or any other property for organizing any event, such as a wedding, a seminar, a concert, etc., you have to charge GST on the rent at the rate of 18%. This rule is based on the notification no. 11/2017-Central Tax (Rate) dated 28.06.2017.

Here are some examples and scenarios to illustrate the different cases of GST on rent of commercial property:

  • Example 4: Mr. G owns a shop in Chennai. He rents it out to Mr H, who is a registered person under GST, for Rs. 30,000 per month. Mr H uses the shop to sell his goods. In this case, GST is applicable on the rent, as it is taxable under notification no. 11/2017-Central Tax (Rate) dated 28.06.2017. Mr G has to charge GST at the rate of 18% on the rent and pay it to the government.

  • Example 5: Mr. I owns a hall in Kolkata. He rents it out to Mr J, who is an unregistered person, for Rs. 1,00,000 per day. Mr. J uses the hall to organize a wedding function. In this case, GST is applicable on the rent, as it is taxable under notification no. 11/2017-Central Tax (Rate) dated 28.06.2017. Mr. I has to charge GST at the rate of 18% on the rent and pay it to the government.

  • Example 6: Mr. K owns a flat in Bangalore. He rents it out to Mr L, who is a registered person under GST, for Rs. 25,000 per month. Mr L uses the flat for living purposes. In this case, GST is not applicable on the rent, as it is exempt under notification no. 12/2017-Central Tax (Rate) dated 28.06.2017.

Finding

In this blog, we have explained the basics of GST on rent of residential and commercial property. We have covered the following points:

  • GST on rent of residential property
  • GST on rent of commercial property

We hope you understood all the points!

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