Government announces 18 percent GST on house rent

Amid confusion rising over 18 percent GST( Goods and Services Tax) on house rent for tenants, the government on Friday clarified that the renting of a residential unit is only taxable when it is rented to a business entity. 

The government also stated that when a property (house) is rented to a private individual for personal use, no goods and services tax will be assessed.

According to the new rule of the 47th GST council meeting that has also become effective since July 18, a GST registration tenant is required to pay Goods and Services Tax at a rate of 18% while renting a residential property.

However, the input tax credit in respect of such transaction may be sought on the ground of it being for the person's use. 

Taking to Twitter PIB confirmed that, "Renting of residential unit taxable only when it is rented to a business entity. No GST when it is rented to a private person for personal use. No GST even if proprietor or partner of firm rents residence for personal use," the tweet added.

Previously, GST only applied to commercial real estates, such as offices or retail premises that were rented or leased. The rent or lease of residences by corporate entities or private people was exempt from GST.

The new regulations will affect businesses and individuals who have rented or leased residential homes.

Companies will now be required to pay 18% GST on the rent they pay for homes they rent out to employees to use as guest homes or dwellings.

For businesses that provide free housing for employees, this will result in higher expenditures for the employees.