From our Bureau
NEW DELHI: The finance ministry on Friday clarified that the new GST (goods and services tax) of 18% on rent on the residential unit, that took effect from July 18, is taxable only when it is rented to business entity.
In a tweet, PIB (Press Information Bureau) said “no GST when it is rented to a private person for personal use, no GST even if the proprietor or partner of a firm rents residence for personal use.”
If any common salaried person has taken a residential house or flat on rent or lease, he does not have to pay GST. However, a GST-registered person/entity who carries out a business or a profession will incur 18% GST on such rent paid to the owner. They can claim the input tax credit on the GST so paid.
‘Persons’ include individuals as well as corporate entities. GST registration is needed when any person carries on business or profession and makes an annual turnover more than the threshold limit defined under the GST law.
“The limit varies according to the nature of supply and state or UT where the principal place of supply is located. If the person supplies services alone, ₹20 lakh per financial year is the limit. The limit is ₹40 lakh for a supplier of only goods. However, if registration is obtained from northeastern or special category states, the limit is lowered to ₹10 lakh. If you are registered as a composition taxable person, you cannot claim the input tax credit on rental expenses but might still have to pay GST on rent on a reverse charge basis.
