These days, the question of whether a paid person must pay GST on housing rent under the goods and services tax (GST) is receiving attention. Tax experts state that up until July 17, 2022, GST was levied on the rent of commercial properties, but from July 18, 2022, GST will only be charged if the dwelling is leased or rented by a GST-registered individual. The 47th GST Council meeting suggested that the renter pay 18% GST on a reverse charge basis (RCM). However, they are able to deduct this amount from their GST filings while still paying sales tax.
Mahesh Jaising, Partner, Leader – Indirect Tax at Deloitte India, commented on what the regulation states in regards to GST on rent of residential property: “No matter the status of the tenant, i.e., whether the service provider or service recipient is registered or not, renting out residential properties was exempt up until July 17, 2022.
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This meant that everyone was excluded from renting out property for residential reasons. However, starting on July 18, 2022, a registered renter would be subject to GST on residential rentals via the reverse charge method.”
Mahesh Jaising commented on this GST regulation change as follows: “Corporate entities and taxpayers who have rented out residential properties to their workers would be impacted by the move. Such registered taxpayers will now be obliged to pay GST under the reverse charge system, which may have an effect on the P&L since the government may contest the credit’s validity by deeming it to have been utilised for personal purposes. The industry should carefully assess this credit eligibility.”
