GST applicability on renting properties in India has been a source of concern due to continuous changes in the law since the implementation of GST. The rules for renting residential property under GST changed on July 18, 2022, a decision made by the GST Council at its 47th meeting. The CBIC has issued a new notification to clarify the scope of GST on rental income from residential property rentals. Let us look at the GST provisions on this topic.
We will immediately clarify that renting an immovable property is considered a supply of service and is subject to GST at 18 percent. The CBIC recently issued Notification No. 15/2022- Central Tax (Rate), which goes into effect on January 1, 2023. To learn more about the notification in question, we must first examine the provisions on this subject in India since the implementation of GST.
GST applies to residential properties until July 17, 2022.
The entry at Sr.No. twelve of Notification No. 12/2017 – Central Tax (Rate) stated that the GST rate for “Services by way of renting of residential dwellings for use as a residence” shall be “Nil.” Accordingly, from July 1, 2022, GST was not in effect (whether registered or unregistered under GST). However, the legal position under GST changed on July 18, 2022. Please note that renting commercial property is always under the ambit of GST.
GST applies to residential properties after July 18, 2022.
- In its 47th meeting, the GST Council recommended that the government impose GST on a person who has given property to a registered person to rent residential property.
- As a result, the CBIC issued Notification No. 4/2022- Central Tax (Rate) on July 13, 2022, withdrawing the earlier allowed exemption from GST for those renting residential dwellings. This notification was made effective from 18th July 2022.
- The net effect of the above amendment is that beginning July 18, 2022, any person who provides services by renting residential property for use as residence to a registered person will be subject to the GST at the rate of 18%.
- It is important to note that GST will continue to be exempt in cases where a residential property is left to an unregistered person after July 17, 2022.
The obvious next question is, “Who will pay tax to the government for renting residential property to a registered person?” The reply can be found in Notification No. 5/2022 – Central Tax, dated July 13, 2022.
The previous Notification, dated June 28, 2017, added a new entry 5AA to Notification No. 13/2017-Central Tax (Rate), which specifies services subject to GST under reverse charge.
According to Entry No. 5AA, anyone who provides services to a registered person by renting residential property is subject to GST 18% under the reverse charge mechanism.
In a nutshell, beginning July 18, 2022, if a landlord rents residential dwellings to a registered person (tenant), such tenant will be required to pay an 18% tax to the government. It should be noted that even if the landlord is registered for GST, the registered tenant is responsible for paying GST under RCM. This table will assist you in summarizing:
Residential Dwelling Rental Services
| Landlord | Tenant | GST applicability | ITC availability |
| Unregistered | Unregistered | No GST | NA |
| Registered | Unregistered | No GST | NA |
| Unregistered | Registered | GST payable by a tenant under RCM | If the property is rented for business purposes, ITC can be claimed. |
| Registered | Registered | GST payable by a tenant under RCM | ITC can be claimed if the property is rented for business purposes. |