18% GST on house rent for tenants? Govt clears doubts on new rule

New Delhi, Aug 12: Amid confusion over 18 per cent GST on house rent for tenants, the government on Friday clarified that the renting of a residential unit is taxable only when it is rented to a business entity. The government also said no goods and services tax will be levied when it is rented to a private person for personal use.

A GST-registered tenant is required to pay Goods and Services Tax at a rate of 18% when renting a residential property, effective from July 18. Only tenants who are GST-registered are subject to the 18% tax on rent payments.

Further, it also said that no GST is applicable when it is rented to a private person for personal use.

"No GST is applicable even if the proprietor or partner of the firm rents residence for personal use, "the tweet said.

Previously, only commercial properties like offices or retail spaces given on rent or lease attracted GST. There was no GST on rent or lease of residential properties by corporate houses or individuals.

The new rules will impact the companies and professionals who have taken residential properties on rent or lease.

The rent paid by companies towards the housing properties taken on rent to be used as guest houses or residences for employees will now attract 18 per cent GST. This will increase the employees' costs for the companies that are offering free accommodation to employees.