The GST council have announced several changes during its 47th meeting in June. These changes came into effect from July 18, 2022. One of the notable changes was an 18% GST applicable on house rent.
The PIB has clarified that the GST rule will not be applicable if the property is rented out to a private person for personal use. Even if a proprietor or a partner of a firm is renting a property for personal use, no GST will be applicable.
Claim: 18% GST on house rent for tenants #PibFactCheck
▶️Renting of residential unit taxable only when it is rented to business entity
▶️No GST when it is rented to private person for personal use
▶️No GST even if proprietor or partner of firm rents residence for personal use pic.twitter.com/3ncVSjkKxP
— PIB Fact Check (@PIBFactCheck) August 12, 2022
An 18 percent GST will only be applicable for GST- registered tenants. The annual threshold limit for GST registration is a turnover of Rs 20 lakh for service providers and Rs 40 lakh for goods suppliers.
As per the new rules, a GST-registered tenant will be liable to pay the tax under the reverse charge mechanism (RCM). The tenant can claim the GST paid under Input Tax Credit as a deduction. This tax is only applicable when tenant is registered under GST and is liable to applying for GST returns. The owner of the property is not liable to pay the GST.
“If any common salaried person has taken a residential house or flat on rent or lease, they do not have to pay GST. However, a GST-registered person who carries out business or profession must incur 18 per cent GST on such rent paid to the owner,” explained Archit Gupta, founder and CEO at ClearTax.
According to the 47th GST Council meeting, pre-packaged and pre-labeled retail packs were brought under GST. 18% GST was also imposed on the fees charged by banks for issue of cheques. Hotel rooms that cost less than Rs 1000 per day were placed under 12% GST slab as opposed to the previously exempted category.
Certain categories of hospital rooms will also be taxed, along with 12% GST on petroleum/ coalbed methane.
The GST Council reduced the tax rate on ostomy appliances from 12 per cent to 5 per cent and GST cut from 12 per cent to 5 per cent on orthopedic appliance (splints and other fracture appliances), artificial parts of the body, other appliances which are worn or carried, or implanted in the body, to compensate for a defect or disability; and intraocular lens.