GST on Rental Property – A Quick guide!

 


GST on Rental Property – A Quick guide! 

Goods & Service Tax implementation in India has crafted a new way to collect indirect taxes from various industries.  The rental industry, is a common income source for many individuals, families or business houses for decades.  In this article, we shall try to simplify the implication of GST on commercial and residential properties.

Pre-GST Era: So before GST came into picture, India had the Service tax regime and accordingly Commercial properties would attract 15% Service tax if the landlord’s total receipts from all his let out properties exceeded Rs 10 Lakhs (Rs 1 Million). Service tax was not applicable to residential properties let out for residential purpose.  If a residential property was let out for commercial purposes (wholly or partly) or to any business entity (irrespective of how it was used) service tax would be applicable.

Post GST: Well the rules haven’t changed much with GST implementation, except for the rates of taxes and the exemption limits.  GST on Rentals today is charged @18% on the Rent value charged (popularly called the Taxable value of service).  The threshold for applicability of GST has been capped at Rs 20 Lakhs (earlier Rs 10 Lakhs under Service tax law).  GST remains exempt for residential properties let out for residential purposes.

Applicability: So, any person or entity earning more that Rs 20 Lakhs annually from renting out of immovable properties to Businesses, must register for GST and pay the taxes.

Computation: For all commercially let out properties, GST is levied on the taxable value and rent is treated as taxable supply of service.  For any charitable or religious trust, operating a place for public purpose, GST is exempt provided, 1.) Room rentals are less than Rs 1,000/- per day, 2.) Shop rentals for businesses are less than Rs 10,001/- per month and 3.) Community halls or open space rentals are less than Rs 10,001/- per day.

Input Tax Credit: GST paid on rentals can be claimed as an ITC can be usually claimed by the tenants for their business provided all criteria for ITC are fulfilled otherwise.

Tax deduction at source for Rental properties:  TDS is deductible by the businesses paying rent, provided the rules on TDS are applicable to them, @10% (AY 2020-21 onwards) if the rental on each property exceeds Rs 2,40,000/- annually.  The TDS will not be deducted on the GST amount, but only the taxable value of rent.

In case of properties let out by governmental bodies to any GST registered business, the GST will be payable under the reverse charge mechanism i.e. the rent payer himself will deposit the GST with the exchequer and in case the property is let out to any unregistered business, the government would themselves deduct GST under a forward charge mechanism.

We trust this article was useful to you.  For any further questions on it or help with your GST compliance, feel free to write to us at info@gjmco.in or Schedule a Call with us today.  Visit us at www.gjmco.in to know more about our services.

 

Thanks & Best regards,

Knowledge Base team

GJM & Co.

Chartered Accountants

www.gjmco.in

Outsource to Outperform

Accounting | Bookkeeping | Payroll | Taxation | Business Setup

USA | Canada | United Kingdom | Australia | India

Comments

Post a Comment

Popular posts from this blog

Significance of Financial Controller in your Business

Image
  Significance of Financial Controller in your Business We come across this terminology of “Financial Controller” many a times across business enterprises, however the average businessman doesn’t have a clear understanding of what financial controllers can do for their business and how can they a significant part in the success of their venture.   For anyone owning or managing a growing business and not having a financial controller, should read this article and understand how important it is to consider evaluating the need of one for their business. In this article, we shall explain the job of a financial controller, how they differentiate from CFOs, why are they needed, and when should a business be eligible to hire the services of one.   Job of a Controller: Accounting and Bookkeeping functions in every growing business typically benefit substantially when they are supervised and guided by an expert finance professional.   CPA/Chartered Accountants are s...
Read more

Tax on Cryptocurrency gains – Unlocking the Mystery

Image
  Tax on Cryptocurrency gains – Unlocking the Mystery   The first Cryptocurrency – Bitcoin was introduced more than a decade ago in 2009 by the so-called father of bitcoin – Satoshi Nakamoto, and since then there has been a flux of cryptocurrencies getting introduced from time to time. Bitcoin and several other rival cryptocurrencies like Litecoin, Ethereum, Ripple, Dogecoin etc. have experienced path breaking growth in the recent years, leading to lot of complexities into the accounting of such currencies and their tax implications globally.   To any first-time reader here, Cryptocurrency is digital currency that uses encryption techniques, rather than a central bank, to generate, exchange, and transfer units of currency. Unlike cash transactions, no bank or government authority regulates these forms of currency or verifies the transfer of funds. Instead, these virtual transactions are recorded in a digitized public ledger called a “blockchain.” Individual units of the...
Read more

How to form a Private Limited Company in India?

Image
How to form a Private Limited Company in India? As new ideas to do business keep emerging, the importance of having the right form of business entity becomes a crucial element prior to initiating any commercial activity.  Indian laws offer a wide and complex variety of vehicles to do business like Sole-proprietorships, Hindu undivided families (HUF), Partnerships, Limited liability partnerships, Private limited companies and Public limited companies.  The choice of your business entity form depends on the volume, scale, complexities and parties involved and one must do a thorough analysis beforehand to determine the choice to be opted for as changing business entity form of an ongoing business at later stages, although doable, can be cumbersome.  It is best to consult a Chartered Accountant firm and discuss your business plans to help arrive at the right decision. In today’s article, we shall deal briefly with the formational aspects of a Private limited company in India...
Read more