With the recent 47th GST Council meeting and a lot of notification issued by CBIC, one of the major topic of discussion is GST on “Rental Income”.
According to the Schedule II of CGST Act, 2017:-
Land and Building
(a) Any lease, tenancy, easement, license to occupy land is supply of service.
(b) Any lease or letting out of the building which includes a commercial, industrial, or residential complex for business or commerce, either wholly or partly, is a supply of service.
Rental income generated by way of letting out of any building for commercial or residential purpose is described as supply of service under GST.
(A) Impact of GST on rental income came from let out of any commercial property for commercial purpose: –
There are Four scenarios in each case:-
1. When the landlord and tenant also is registered under GST.
S.No. Landlord Tenant
Both are GST Registered Needs to collect the GST from the tenant under Forward Charge at the rate of 18% may claim ITC on the GST paid on rent if the entire conditions of S-16(4) is complied with and the same is not blocked by S-17(5) of the CGST Act,2017.
2. When only the landlord is registered under GST.
S.No. Landlord Tenant
Only the landlord is registered under GST needs to collect the gst from the tenant under Forward Charge at the rate of 18% Cannot claim any ITC on the gst paid on rent as he is not registered.
3. When the landlord is NOT registered under GST, but the tenant is registered under GST.
S.No. Landlord Tenant
If Only the tenant is registered under GST then GST Not applicable. Neither liability to pay GST under RCM nor can claim any Input tax credit.
4. When the landlord and tenant also is NOT registered under GST.
S.No. Landlord Tenant
Both are unregistered under GST GST Not applicable. GST Not applicable.
(B) Impact of GST on rental income came from let out of any residential property for commercial purpose: –
5. When the landlord and tenant too is registered under GST.
S.No. Landlord Tenant
Both are GST Registered No Needs to collect the GST from the tenant. Will discharge the GST at the rate 18% under RCM and can claim ITC on the GST paid on rent if the entire conditions of S-16(4) is complied with and the same is not blocked by S-17(5) of the CGST Act,2017.
6. When only the landlord is registered under Goods and Service tax.
S. No. Landlord Tenant
Only the landlord is registered under GST needs to collect the GST from the tenant under Forward Charge at the rate of 18% cannot claim any ITC on the GST paid on rent as he is not registered.
7. When the landlord is NOT registered under GST however the tenant is registered under GST.
S. No. Landlord Tenant
Only the tenant is registered under GST then GST Not applicable. Liability to pay GST under RCM at the rate 18% and can claim ITC.
8. When the landlord and tenant also is NOT registered under GST.
S.No. Landlord Tenant
Both are unregistered under GST GST Not applicable. GST Not applicable.
(C) Impact of GST on rental income came from let out of any residential property for residential purpose: –
9. When the landlord and tenant too is registered under GST.
S.No. Landlord Tenant
Both are GST Registered No Needs to collect the GST from the tenant. Liability to pay GST under RCM at the rate 18% and cannot claim ITC as it is used for residential (personal) purpose.
10. When only the landlord is registered under GST.
S.No. Landlord Tenant
When only the landlord is registered under GST. No need to collect the GST from the tenant as exempt supply under notification 12/2017. GST not applicable in this case.
11. When the landlord is NOT registered under GST however the tenant is registered under GST.
S.No. Landlord Tenant
Only the tenant is registered under GST, GST Not applicable. Liability to pay GST under RCM at the rate 18% and cannot claim ITC as it is used for residential (personal) purpose.
12. When the landlord and tenant is also NOT registered under GST.
S.No. Landlord Tenant
Both are unregistered under GST, GST Not applicable.
Key Points:-
(a) Commercial property cannot be used for residential purpose.
(b) If the aggregate turnover form the supply of goods and services of the landlord does not exceed the threshold limit of INR 20.00 lacs during the year (INR 10.00 lacs in the special category of states), then there is no requirement of registration under GST.
(c) Irrespective of the threshold limit of registration, if the tenant is liable to discharge the GST under Reverse Charge Mechanism, then he/she will be liable to be registered under GST and all the provisions of GST will be applicable to him/her as if he/she is the supplier of service under GST.
Thus, the rental income generated from any property, especially the residential property from 18/07/2022 requires due adherence and attention for timely discharge of liability and availment of Input Tax Credit by a taxpayer while fill the returns for the month of july-2022 onwards.