New Delhi, July 20, 2022: The Revenue Division of the Ministry of Finance will impose an 18% GST on all house rentals across the country from July 18.
According to the notification, a residential property rented to a GST registered individual would be subject to an 18% tax. In addition, the lessor is released from liability because the tenant is responsible for paying the tax.
Under the GST scheme, compulsory registration would be required for anyone who made a supply of goods or services worth more than Rs. 40 lakh or Rs. 20 lakh, respectively.
With this change, the tenant who rents a house to be used as a guest house, as a place of care for employees or directors, or both, would be taxed.
According to GST tax specialist Raveedaran Muthuswamy, an individual or landlord who registered for GST and rented residential property for personal use rather than as a business expense would also be subject to the tax.
He said: “The taxation of rents in a country like India, where the majority of the citizens do not own a house, has been a sensitive subject since the introduction of the utility tax. Only commercial real estate was subject to the introduction in 2007 of the service tax on rents. When the GST was first introduced in 2017, residential property was excluded and remained subject to it.
Hitesh Thakkar, vice president of NAREDCO West, thinks this choice will significantly affect the mindset of homebuyers.
Anand Gupta, head of RERA committee and Builders Association, said the reverse charge mechanism is applicable to all residential units with registered GST numbers (with turnover of Rs 20 lakh).