The 47th GST Council meeting recommended that GST be made applicable in cases where the residential property has been rented out to a registered person under the GST starting on July 18, 2022, there has been a lot of discussion about the applicability of GST on renting residential property. Let us first clarify the status of the GST Law about the GST on renting residential property on or before July 17, 2022.
Refer to Notification No. 12/2017 from June 28, 2017. The GST Act exempted several services, including those provided by renting a residential property for habitation. Thus, regardless of the person’s status (registered or unregistered), GST did not apply to rent a residential property.
Let us also consider what has changed as a result of the 47th GST Council meeting’s recommendation, effective as of July 18, 2022: Following Central Tax (Rate) Notification No. 04/2022 dated July 2022, CIBIC has revoked the exemption granted to the registered person.
By RCM, CBIC has announced the following via Central Tax (Rate) Notification No. 05/2022 dated 13/07/2022:
| Category of Supply Services | Supplier of Service | Recipient of Service |
| Rental of a residential property to a registered person as a form of service | Every Person | Any Registered Individual |
The PIB has now made it clear that a residential unit is only taxable for rental purposes when it goes to a business entity:
- Rent is only taxed when a business entity leases a residence.
- GST is not applied when a private individual rents it for personal use.
- No GST, even if the business’s owner or partner rents the home for personal use.
Let us now assess the various scenarios to determine the effect of the GST’s applicability on renting residential property starting on July 18th, 2022:
- Registered under GST: If the tenant and the landlord are listed under GST, the tenant will be liable for paying GST due to the reverse charge mechanism. The tenant is thus eligible to submit an ITC claim.
- Renting property from a landlord not registered under GST: In this case, liability arises for the tenant under the reverse charge mechanism.
- When an unregistered tenant leases property from a legal landlord with the government, the tenant is not liable for paying the tax because the landlord stands with the law. 12/2017 Notification, dated 29 June 2017.
- Unregistered Landlord and Tenant: No GST liability exists because both parties are still subject to the GST. 12/2017 Notification, dated 28 June 2017.
There might also be some other situations:
- Renting a residential property for employees is done by Company/LLP/Firm/AOP/BOI: In this scenario, GST will be paid via RCM, and ITC can be reclaimed.
- Rental of a home by a registered composition dealer: In this scenario, GST will be paid under RCM, but under the rules that apply to composition dealers, GST paid under RCM cannot be claimed as ITC.
- An individual registered for GST as a proprietorship business decides to rent a residential property for himself. In this situation, GST must be paid under RCM, and since it is a blocked credit under the terms of the GST Act, it cannot be claimed as an ITC. However, according to PIB’s clarification on Twitter, no GST is applicable.