Do You Have To Pay 18% GST On House Rent? A FactCheck
This applies to tenents who are registered under the GST and not to renters like salaried persons who are not GST-registered
A viral claim on social media, stating that the government will be charging 18% Goods and Services Tax (GST) on the rent paid by residential tenants is misleading, as the GST will only be levied on those tenants who themselves are registered under the GST.
This change largely applies to corporate entities, businesses or persons who are GST-registered, and are renting residential property. It will not apply to salaried individuals since they are not registered under the GST.
According to the Central Board of Indirect Taxes, those businesses having a turnover exceeding ₹40 lakhs on the sale of goods and ₹20 lakh on the provision of services (or a mix of both) must register under the GST. Those businesses below this threshold may register voluntarily.
This change came as a part of the 47th GST Council's meeting on June 29, recommending a set of changes on the GST levied on a variety of goods and services; all effective from July 18.
Some of these changes included commonly used household goods such as pre-labelled and pre-packaged food items and hospital beds among other goods.
The claim can be seen below. It was tweeted by political activist and Trinamool Congress (TMC) spokesperson Saket Gokhale, and was picked up by other users of social media. Gokhale's tweet implies that there is a blanket GST imposition on the rent paid by all tenants, which is misleading.
His tweet can be seen below.
Others too used it on social media.
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FactCheck
The decisions taken by the 47th GST Council removed the exemption on GST-registered entities from paying GST on the residential property occupied by them, effective July 18.
Salaried individuals are not required to register for the GST and are thus not subject to these news rules, which can be read here.
The GST-registered body as the tenant, would need to pay the GST, and not the landlord, even if the landlord is not GST-registered.
Speaking to BOOM, Vishal Thakkar, chartered accountant and an author of several books on finance, said, "GST is usually collected and paid by the supplier and not the consumer. However GST on residential property by GST-registered persons is likely to be on reverse charge mechanism since it otherwise creates a loophole where the landlord will pay no GST, and businesses will get away with only paying rent"
Those who run businesses from home would need to pay GST rent on residential property if they are GST-registered, but they can claim input tax credit on the same.
"Those with GST-registered businesses will have to pay GST on their rent, but they can claim it as an input tax credit towards their business. Those without GST-registration need not pay GST on their rent", said Thakkar.
The government has also called refuted these claims through their handle PIB Fact Check.
The recent changes to the GST regime has given rise to its fair share of misinformation, and has been debunked by BOOM.
Several users have previously falsely stated that GST would be levied on the services provided by crematoriums and burial grounds.
Also Read: Claims Of 18% GST On Crematorium Services Are Misleading; Here's Why
Social media users also stated that GST would be levied on the use of public toilets, which is also not true.
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