A recent announcement states that an 18% tax would apply to any residential property rented to a GST-registered person. The fact that the tenant is in charge of paying the tax also exempts the lessor from accountability.
Everyone who supplied products or services worth more than Rs. 40 lakh or Rs. 20 lakh would need to register under the GST system, which would be mandatory.
The lessee who rents a home to use as a guest house, as a location to lodge employees or directors, or both, would be taxed as a result of this change.
A person or owner who registered for GST and rented a residential property for personal use rather than as a business expense would also be subject to tax, claims GST tax expert Raveedaran Muthuswamy.
He said, “Taxing rents in a nation like India, where the majority of citizens don’t own homes, has been a touchy subject ever since the introduction of the service tax. Only commercial property was subject to the 2007 introduction of the service tax on rents. When GST was first established in 2017, residential property was excluded and remained to be subject to it.”