Impact of GST on Rent | H&R Block India | Blog
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Impact of GST on Rental Income

GST impact on Commercial and ResidentialRent

Renting is an agreement wherein the payment is made by one party to the owner of the property in lieu of the temporary use of the property. It is a very common source of income for a lot of people in India as well as in other nations. The blog explains the impact of GST on the rental income of immovable property, Post the implementation of GST, the question arises of how it will impact the renting business and if it is going to be a better situation for the landlords?

To understand this let us first consider the Pre-GST regime, in which the landlord had to get himself registered under service tax if his total rental income exceeded Rs 10 lakh. Also, if the property was let out for the commercial purpose, then 15% service tax was levied on the landlord.

Under the GST regime, the income from renting out of residential property for commercial purpose has been exempted up to Rs 20 lakh. Whereas, no GST is applicable if the house is let out for the residential purpose.
Rent is treated as a supply of service under the GST act. All commercial properties are taxed at 18% GST, and the place of supply is the location of the immovable property. To understand this better, let us consider the following cases:

Case 1: Mr. John  is residing is Mumbai, and has let out his property in Pune on rent.  He receives Rs 5 lakh per annum as rental income.

  • It is not mandatory for him to register under GST as his income doesn’t exceed the threshold limit of Rs 20 lakh.
  • The place of supply is Pune (i.e. the location of the immovable property)

Case 2: Mr. John is residing in Mumbai, has let out a commercial space on a rent of Rs 2 lakh per month and earning Rs 24 lakh per annum as his rental income.

  • It is mandatory for Mr. John to get himself registered under GST.
  • The place of supply is Mumbai (i.e. the location of the immovable property).
  • GST @ 18% is applicable.

Exemptions on Rental income from Immovable Property Under GST

  • Property is let out for residential purpose.
  • Rental income from property let out for commercial purpose doesn’t exceeds Rs 20 lakh annually.
  • Rent received by the registered charitable trust or a religious trust. Where:
    1. Rent on rooms is Rs 1,000 or less per day.
    2. Rent on shops, business units, community halls of such charitable trust are Rs 10,000 or less per day

GST on Renting a Cab

Cabs have become an important part of urban lifestyle, as it ensures the connectivity across different locations and eases commuting difficulties for working professionals. The major impact of GST would be on radio cabs, such as Ola or Uber, which would attract 5% GST without the benefit of ITC, whereas metered cabs and auto rickshaws are exempted under GST.

As GST is new in our nation, its impact on your business can be confusing and cumbersome, So,  focus on your business, while, our dedicated GST experts at H&R Block India are here to help you with end to end solutions for all your GST compliance requirements.

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Niteesh Singh
Niteesh Singh
Niteesh is a Tax Researcher and Content Lead at H&R Block (India). He holds an MBA with a specialisation in BFSI domain. In his career spanning over six years, he has helped thousands of people understand taxes in a simple and effective manner. Outside work, Niteesh is an astronomy geek who is also involved in wildlife conservation activities.