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GST Impact on Rental Income

GST has simplified the indirect tax structure in India and collecting GST through various sectors has become extremely easy. One of the most common sector that is a major source of income is rent. Rent is an agreement between two or more parties where the tenant pays the agreed amount to the property owner or landlord. In this article, we will discuss the GST impact on rental income.  

Pre-GST Regime

Before the implementation of GST, the landlord had to register himself under service tax in case if the rental income exceeds 10 Lakhs INR. Moreover, in case if the property irrespective of commercial or residential, is given for a commercial purpose than the property owner had to 15% service tax.

Post-GST Regime

After the implementation of GST the threshold limit for letting out property has been increased from 10 Lakh INR to 20 Lakh INR. Moreover, no GST rate is applicable to the property that is given for the residential purpose.

Impact of GST on Rent

Under the GST regime, rent is treated as a supply of service. The commercial property is charged at the GST rate of 18% and the place of supply is the area where the immovable property is situated. Let us take the following case scenarios to understand this:

Case-1: Mr. Ramesh lives in Delhi and has given his property in Chandigarh on rent through which he is getting 10 Lakh INR per annum as rental income.

The impact of GST will be null and it is not compulsory for him to register under GST as the amount is less than the prescribed threshold limit of 20 Lakh INR.

In this case, the place of supply is Chandigarh.

Case 2: Mr. Ramesh lives in Delhi and has given his property in UP on rent through which he is getting 31 Lakh INR per annum as rental income.

Mr. Ramesh needs to obtain GST registration compulsorily and he has to pay 18% GST on the rental income earned as the amount exceeds the prescribed limit of 20 Lakhs INR.

In this case, the place of supply is UP.

Rental Income Exempted from GST

Here is the list of rental income that is exempted from GST:

  1. Rental income from residential property
  2. Income through commercial property where the income does not exceed the 20 Lakh prescribed limit
  3. Charitable trust or religious trust rental income; where:
  4. Rent received by the registered charitable trust or a religious trust. Where:
  • Room rent less than 1,000 INR per day.
  • Business units, shop rent, community hall rent less than 10,000 INR per day

GST on Cabs

Cabs are playing a vital role in the urban lifestyle as it has eased the commuting problem. GST has impacted Ola, UBER and other radio cabs as 5% GST is applicable to these cabs. Whereas, metered cabs and rickshaws are exempted under GST.