GST on rental: Everything you need to understand about the appropriate tax rate

The introduction of GST has had a considerable influence on the residential and commercial real estate industries. The rental market, like the financial market, is subject to the tax levy. Rental revenue from commercial units, for example, is subject to GST. Other regulations and exclusions of the new tax regime concerning rental properties are listed below.

Rent payment taxation in the pre-GST period

Before the advent of GST, a property owner was required to register for service tax payment if the yearly revenue from all rental properties surpassed Rs 10 lakh. This was only relevant to commercial premises and residential homes utilised for business. If the owner’s total revenue from rental properties was less than Rs 10 lakh per year, they would not be required to pay service charges. Before the implementation of GST, commercial premises generating more than Rs 10 lakh in rent were subject to a 15% service tax.

GST applied on rent payments

According to the GST Act, renting out a business property or a property utilised for commercial purposes is deemed a supply of services. With this, GST will be levied on a property when it is leased or rented.

  • GST would apply to these sorts of properties –
  • Commercial real estate
  • Commercial properties
  • Running a residential property company

GST exemptions

Rental properties for residential use

If a residential property is rented out for residential reasons, no GST is levied on the money earned. This implies that any rental profits raised for residential use would be free from taxation under the Act.

Charitable or religious trusts’ properties

If a property is leased for charity or religious purposes, no GST will be imposed on the rental revenue. However, GST exemption would be granted only if,

  • A room costs less than Rs 1,000 per day to rent.
  • The monthly rent for a store is less than Rs 10,000.
  • The rent for a community centre or outdoor field is below Rs 10,000 per day.

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.


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