If you are wondering as to whether you must charge and collect GST on the rent that you receive from your property, here is what you need to do. The way GST is treated for the commercial and the Residential properties is different. Again, if you are running a business, the payment of the rent, is one of the most important expenses and it is essential that you know your eligibility for claiming the Input Tax Credit on the GST that is paid on the rental expense. Investing in a premium flats in Gurgaon will be a good option.
Pre-GST Rules
In this step, the landlord will have to obtain a service tax registration. If the total taxable income of the landlord that includes the rents from all the properties exceeds Rs. 10 lac in a year then he will have to pay taxes. This means that anyone who has less than Rs. 10 lac rental income in a year will be exempt from taxes.
Moreover, as of now the law has also exempted the tax from the rent on the residential properties. Only the rent received from the commercial properties attract service tax. This means that even if the rent on residential properties exceeded 10 lac per year, you will not have to pay taxes.
What are the Changes that have come up under GST?
The goods and the service tax has been clubbed together under the GST regime. As a result of this there is no more confusion with the separate taxes on goods and services. The threshold limit for the applicability of the GST has also increased from Rs. 10 lac to Rs. 20 lac. Several landlords are covered under the regime of service tax. This will be except the indirect tax net with the implementation of the GST.
GST on the Renting of Residential Property
The 48th GST council has clarified that there will be no GST from the rent of the residential properties. This means that if the owner of the house rents the property for residential purpose, he will not have to pay taxes. Therefore, if the income that the owner generates from the house rent is taxable, he will have to pay taxes based on the Income Tax Act. This means that if you are staying in the residential property and you are using it for any commercial purpose, you will not have to pay GST. This means that even if you are a business owner and staying in a rented property and using it only for household purpose, you will not have to pay any GST on the rent.
GST on the Commercial Renting of the Property
When you are renting a commercial property, that is considered supplying a service and it is for this reason that this is taxed under GST. The tenant has to pay 18% as GST for the rent in case the property is used for commercial purpose.
If in case the commercial property is owned by a Religious Trust or a Registered Charitable Trust, the rent is tax free and therefore, there is no GST. To get the exemption, however, there are certain conditions that need to be fulfilled
1. The rent of the room cannot exceed Rs. 1000 in a day.
2. The rent of the community hall or the rent of the open area should not exceed Rs. 10,000.
3. The rent from the shops also should not exceed more than Rs. 10,000 per month.
Conclusion
As per the GST Act, if you rent out an immovable property in Gurgaon, this is considered to be a service, however, there are also other conditions that are taken into consideration for implementing GST. This includes the properties that you are using for leasing, renting or giving a license to occupy. When you are renting out any commercial, residential or industrial property for the purpose of Business, GST will be applicable. You should however, remember here that if you are renting out a residential property for residential purpose, GST is not applicable.