Whether a paid worker should pay GST on home rent is a topic of discussion these days about the goods and services tax (GST). Until July 17, 2022, the rent of a business property was subject to GST; however, beginning July 18, 2022, GST will be levied if the dwelling is rented or leased by a GST-registered person.
Tenants should pay 18% GST on a reverse charge basis, as advised at the 47th GST Council meeting (RCM). However, they may deduct this amount from the sales tax they pay in their GST reports.
Currently, tenants who are registered under the GST system must pay 18% tax when renting a property for business reasons. The property owner is exempt from paying the GST.
A renter who provides services out of a residential rental property will be required to pay GST tax at the rate of 18%.
According to the Reverse Charge Mechanism, a tenant will be required to pay tax (RCM). The GST paid under Input Tax Credit is deductible by the tenant.
Both individuals and corporations can be renters who are GST-registered.
Anyone operating a business or profession with an annual turnover over the threshold must register for GST.
The new GST rule will have an effect on businesses and professionals that have rented or leased residential homes.
“No GST when it is rented to a private person for personal use. No GST even if the proprietor or partner of a firm rents residence for personal use,” the government said.
“The limit varies according to the nature of supply and state or UT where the principal place of supply is located. If the person supplies services alone, ₹20 lakh per financial year is the limit. The limit is ₹40 lakh for a supplier of only goods. However, if registration is obtained from northeastern or special category states, the limit is lowered to ₹10 lakh,” said Archit Gupta of Clear adding, “If you are registered as a composition taxable person, you cannot claim the input tax credit on rental expenses but might still have to pay GST on rent on a reverse charge basis.”
