The Goods and Services Tax (GST) regime has streamlined the taxing structure for commerce in all the industries. The same applies to the property rental micro-industry as well.
Property rentals are a prominent means of revenue for many in the country. GST has had a deep-seated impact on the property rental business and how. Interesting inferences can be drawn from the influence of GST on residential property and the influence of GST on commercial property in India.
1. Situation before GST on commercial property in India.
Prior to the GST coming into action, the landlord’s had to obtain a service tax registration. But, this was only applicable in the scenario that the tax on all his properties exceeded the tune of Rs. 10 lakhs/year. Those who raked in a net income from their rental business that was lesser than this value, did not have to sign up for the same.
Commercial properties of every kind required landlord’s to pay a service tax if they were let-out. Even the residential properties being utilised as commercial properties. However, the same was not applicable on residential properties.
2. Present GST implications of property rental
GST covers the taxation of any service that defines the renting out of property commercially. However, GST is only applicable on the following:
• There is GST on commercial rental income in the form of a plain rental, easement, lease, or ‘license to occupy’.
• There is GST on commercial property in India that has been let out on rent; the same is applicable for industrial and residential property in India.
3. Immediate effect of GST on rents
The present conditions dictate that residential properties are exempted from GST. However, any kind of immovable property rented out for business shall attract a GST of 18%. However, GST has made the bearings easier for commercial property owners in the rental business. The GST gst on commercial rental income is now applicable only upon earnings of Rs.20 lakhs or more. Thus, anyone that procures an income of Rs. 20 lakhs or more from their commercial rent-outs are supposed
to submit a GST on the same; while those earning below this bracket get a further exemption of upto another 10 lacs of earnings, in comparison to the erstwhile laws.
4. Calculation of GST on commercial property rentals
• For all commercial property rentals, the rent is a taxable supply of service and the GST applicable on it is 18%.
• Charitable and religious trusts do not have to pay gst on buying commercial property or managing them, under the following diktats:
I. The rent on the rooms is less than Rs.10000
II. The rental price of the shops and other business spaces is less than Rs.10,000/ month.
III. The rental of a community hall or any open venue that charges less than Rs.10,000/day.
• Those paying gst on commercial property in india can ITC on the totality of their tax dues.
5. Provisions for tax deductions on income tax for the commercial property rentals.
The GST is charged on the rental amount collected by the landlord. So, the landlord must account for the GST they shall have to pay when drawing up the rental plan for their property. The tenant must deduct 10% income tax at the source if the rent for the property exceeds Rs.1.80 lakhs. TDS is applicable on residential as well as commercial properties. GST is not applicable on TDS.