GST applies on renting of residential dwelling for commercial activity

 As per the notification number 12/2017 entry number 12 dated 28^th June 2017, rental income by way of renting residential dwelling for residential purpose is exempt from GST without any conditions or restrictions. However, residential properties rented for business purposes do not fall in the purview of GST so these are subject to GST. Residential properties rented for commercial activities are subject to GST, no exemption is given to such income.

When does GST becomes applicable on rental income from commercial activities?

Under new tax regime, the exemption limit on rental income from commercial activities has increased from 10 lakhs to 20 lakhs. In other words, individuals earning rental income from residential dwelling for commercial activities are liable to pay GST on such income.

GST rates on renting residential dwelling for commercial purposes.

Income from renting residential dwelling for commercial purposes would attract GST @ 18%. If the rental income exceeding 20 lakhs, then GST would apply. If the amount of rental income does not exceed 20 lakhs, then GST would not apply. Rental income earned from renting out of religious place owned and managed by a registered charitable or religious trust for the public shall be exempt from GST but in some cases exemption cannot be claimed and the cases are:

• The room rent is RS 1000 or more per day.
• Rent for premises, community hall, open area, etc. is Rs 10000 or more per day.
• The rent for shops or commercial spaces is Rs 10000 or more per day.

Is the GST on rent claimable for the purpose of input tax credit (ITC)?

If the taxpayer satisfied all the terms and conditions for claiming input tax credit, then input tax credit on GST paid can be claimed. The provisions that should be fulfilled for claiming input tax credit are as follows:

• The owner of the leased property has to collect TDS from the person paying rent.
• The payer of rent has to deduct income tax at source i.e. TDS @ 10% if the rent for the property exceeds 180000 per year. If the payer failed to do so will have to face penalties and may also face penalties with prosecution.

What will be the place of supply in case of GST on commercial rent?

Under GST, the place of supply in case of commercial rent from immovable property would be the location of the immovable property.

For example, if you are residing in Jaipur and the property is situated in Mumbai then the place of supply will be Mumbai and Mumbai would receive the SGST.