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GST Impact on Rental Income of a Residential House Property

GST Impact on Rental Income of a Residential House Property

The GST Council made a recommendation to the Government to impose GST on “a person has given residential property to the registered person (GST Registered Person) to renting of residential dwellings (Living) with effect from 18.07.2022 in its 47’th meeting at Chandigarh on 28th &29th of June’2022.

Prior to 18.07.2022, A person who has given a residential property for the residential purpose (Other than Commercial purpose) is exempted from GST Tax as per Notification No.12/ 2017- C.T. Dated.28.06.2017. Now as per 47th GST Council recommendations, CBIC has given Notification No.4/2022- Central Tax (Rate), Dated.13.07.2022 withdrawn such exemptions.

Now onwards, as per Notification No.05/2022-Central Tax, Rate) dated.18.07.2022, an unregistered person (Not registered under GST) has given the residential house property rented out to a registered person (Registered under GST) and is liable to pay GST under Reverse Charge Mechanism by the Tenant.

If a residential property owner (Landlord) is unregistered under GST Law, he has given such residential property to a registered person (Registered under GST Law), for use the purpose of residential under that circumstance, Tenant is liable to pay GST tax @18% under Reverse Charge Mechanism (RCM) as per Notification No.05/2022-Central Tax (Rate) dt.13.07.2022.

Example-1:

When a company takes a residential house property for use of residence on rent for employees if will be considered as an item of business expenditure. GST Tax will be paid @18% under RCM and eligible to claim Input Tax Credit by the company.

Example.2:

When a person is having GST registration under Composition Scheme and takes a residential house property for the purpose of residence on rent then it will be considered as an item of business expenditure. GST Tax will be paid under RCM but not eligible to claim the input tax credit as per Section 10(4) by a composition dealer.

Example.3:

When an individual who is a registered taxpayer under GST Law,2017, as a proprietary concern, takes a residential house property for the purpose of residence on rent for him or her or their family then it will be considered as an item of personal expenditure and not the business expenditure of a proprietary concern. GST tax will be paid under RCM but the ITC of the GST tax paid under RCM be claimed as it is blocked as per Section 17(1) of the CGST Act,2017.

Example.4:

When a company, is registered under GST Law and take a residential property on rent for one of its director for residential purposes, then such company have to pay GST Tax @18% under RCM as per N.No.05/2022-Central Tax(Rate).dated.13.07.2022 and thereafter, claim an input tax credit (ITC) on the same.

Example.5:

An unregistered person (Unregistered under GST) has given a residential house property to an unregistered person (Unregistered under GST) on monthly basis for use for residential purposes, under circumstances TENAT is not liable to pay GST. Because it is exempted as per Notification No.12/2017-Central Tax (Rate) dated. 28.06.2017.

In case of any query/doubt on GST Impact on Rental Income of a Residential House Property under GST law or any other query related to GST, please feel free to contact the ASC Group.

Also Read: FAQs on GST Applicability of RCM on Renting of Residential Dwelling

Disclaimer: The contents of this article have been prepared on the basis of a Press Release by the GST Council issued on the 28’th & 29’th, June’2022 and Notification No.04/2022, CentralTax (Rate), dated.13.07.2022 and Notification No.05.2022, Central Tax (Rate), dated.13.07.2022 issued by the CBIC. Although care has been taken to ensure the accuracy, completeness and reliability of the information available, the author assumes no liability. Therefore, users of this information are expected to refer to the relevant law, the information as given in no case shall be constructed as professional advice or opinion.

 

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