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.
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.
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.