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How GST applies on rent earned from Commercial Properties?

How GST applies on rent earned from Commercial Properties?

Real estate is in point of fact, one among the most crucial enterprises in our nation. In the present day Real estate sector has ascended as a gainful market. The realty sector has seen quick progress in the past one and a half decade or so. To this extent, if the economic advancement is considered, the Realty market has indeed a gigantic portion in the GDP of our nation. A fast development in this key segment suggests quick GDP development, subsequently enlarging the business open doors too. No doubt the real estate developers who have a GST registration contribute major share in the tax revenue.

Actually, the Goods and Service Tax framework has propelled by and large simplicity of working together in every industry. Same is for the real estate ventures. The GST department has facilitated key standards for the realtors, developers and constructors who are having GST registration. The purpose is to do away with all the major hurdles that these realtors, developers and constructors were facing prior to introduction of GST regime.

1. GST on Commercial Property rent

Currently the government is giving more attention to its drive of “Housing for All by 2022”. Accordingly the GST department from time to time has drawn out several relief measures focused on the purchase of affordable homes. Very recently, the GST administration had cut down the GST rates altogether, so as to specifically hold up the affordable housing segment in the realty market.

But if someone has lease out or rented out a Commercial Property for business motive, how will the rule of GST on Commercial Property rent apply?

Here we will comprehensively explain about the arrangements of GST on rental income from commercial property.

2. GST effect on the income from Rent on commercial property

The beginning of the Goods and Services Tax (GST) system has without doubt improve simplicity of working together in pretty much every industry.

As we see, the rental income is now becoming a considerable part of the middle as well as high income group people. This is appropriate for a few people of middle and higher salaried as well as business people. Particularly, the developers or realtors having GST registration and have rented out their property for trade people, and also gain incredible revenue from it. Subsequently, we should think about the general effect of GST on commercial rental income or GST on office rent (i.e. GST on lease).  

Give us a chance to be able to understand when and how GST impacts on the rental pay from business properties.

3. Which situation is that when there’s exemption of GST on commercial rental income?

The effect of GST is distinctive in various situations. According to the GST law, GST excluded on rental pay:-

  • If an ardent private property is leased for the private reason as it were.
  • However, if an enduring property is leased for business or trading purpose, it will pull in GST. This is because in that case, it would be considered as a stock of service.
  • Besides, there is an edge limit for the materiality of GST on rental salary from the business property.
  • GST will be material just if the yearly rental pay from a business property goes above INR 40 lacs. All things considered, GST registration is additionally mandatory.
  • For sloping and North-Eastern states, the edge for GST registration and materialness of GST on rental pay is INR 20 lacs.

4. What is the total rate of GST on rental income from commercial property?

Any sort of rent or rental salary earned from an undaunted business property for business use would pull in GST @ 18%.

  • After GST was actualized, the GST pace of 18% was pertinent to the rental salary up to INR 20 lakhs from a business property. The edge has been raised to INR 40 lacs starting at now.
  • The realtors, just as land proprietors who acquire yearly rental salary up to INR 40 lacs from a business property, leased for business use.
  • Moreover the 34th GSt council had introduced substantial reduction in GST on affordable houses from 8% to 1%.

5. What is the total rate of GST on holy or benevolent trusts?

On the off chance that there is a holy trust or an establishment that possesses and/or is dealing with a community plot for open use, for example, sanctuary, motel, Sarai, dharamshala, goshala or a public venue, it will be excluded from GST registration. Nonetheless, GST registration will be mandatory for such element just if-

  • rental fee from such spaces (rooms of the motel) is up to INR 1000/ – every day.
  • rental fee from the shops and other business space is up to INR 10,000/ – every month.
  • rental fee from the public venue is up to INR 10,000/ – every day.

6. Whether ITC is available on GST on Rent from commercial property?

Indeed, the Input Tax Credit can be guaranteed on GST that you have paid on the rental income from a business property that you leased out for business purpose.  

An individual who is paying GST on lease rent can generally claim the input for this GST tax paid to make good on his further regulatory GST liability. At the end of the month, if every one of the provisions to guarantee Input tax credit is satisfied, Input Tax Credit on GST paid on lease can be availed.

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