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No GST on House Rent From 1st January 2023, See what New Law Say

Central Board of Indirect Tax and Customs (CBIC) has recently released new rules about the Goods and Service Tax (GST), which include no GST taxes
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No GST on Rent
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Central Board of Indirect Tax and Customs (CBIC) has recently released new rules about the Goods and Service Tax (GST), which include no GST taxes will implement on residential units. The 47th of GST council Meeting presided over by Union Finance Minister Nirmala Sitharaman in June 2022, approved a slew of Changes to the Taxing scheme.

 Then the second modification Meeting went into effect on July 18, 2022. One of the most significant changes was that GST registered Tennent must Pay GST at the rate of 18% when Renting a residential dwelling. 

According to the investigation of the Accounting & Financial Women’s Alliance (AFWA), it was clear that- GST on Residential House rents is not applicable for all the tenants who are taking Rental houses.    

This rule was not clear in the first place, so let’s have a Quick Fact Check with this article.

To Whom These Taxes are Applicable?

This new GST rule does not apply to the Salaried class people (Non- GST registered). This is only Payable to the GST-registered Tennent, i.e. Those who are engaged to a Business income and the income is above Threshold (annually 20 lakhs). 

When this law was first declared there were many misconceptions connected to it, and many tenants had their assumptions. The Validity of this rule is only applicable when you are taking a house on a Residential property for rent and carrying out some Interchange of Goods and Services.    

How will Residential Property Be Taxed?

Here, the landlord being GST registered is Not A Compulsion, in this case, the Tennent plays the Responsibility Role, and this 18% GST is only applicable if the Tennent is GST registered. The payment will act through RCM (Reverse Charge Mechanism), which means the tenant or recipient will directly pay the taxes to the Government and Tennent can be Claimed as an input Tax Credit.

Who Will be Affected by The New Rule?

Many companies rent properties like Guest Houses or any organization as such makes use of any rental residential property for the employee, so in such cases, these companies and organizations are payable for this additional tax on rents on such properties. Even if Tennent is engaged in small-scale Businesses like shops or any operational enterprise, any content creator who is renting a flat to record the content, every Business professional Operating From rented Residential properties is subjected to the 18% GST as an addition to the rent (not to the landlord but to the government and being GST-registered is mandatory). 

But if the employee or any salaried person is taking a house on rent for Pure residential purposes then he/she is free from any additional GST tax on the rent.

Wrapping up

Learning the correct information regarding any financial statements is equally important. To understand if your situation applies to this additional tax payment make sure you consult your CA or tax consultant. 

Hoping we were able to sort out some of your misconceptions about heeding these new rules of the GST.

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