Impact of GST on rental income from commercial property

Read on to know the GST rates applicable for rent earned from commercial property

The Goods and Services Tax (GST) introduced in India in 2017, marked a new chapter in the tax system in the country, making India a single market from the point of view of levy of taxes. This new tax regime is altering the way taxes are calculated in many industries and in various scenarios. We take a look at how the new tax system impacts rental income from commercial property.


GST impact on rent from commercial property

In case a residential property is rented out, there will be no GST on that. Any other kind of renting, like commercial or industrial, would attract GST at the rate of 18 percent as letting-out a property would be treated as a supply of service.

If the rental income is more than Rs 20 lakh per annum, then the landlord, which may be any entity like companies, will have to take a registration with GST Network (GSTN) and pay the GST on the rental income. Before GST came into effect, the threshold limit was Rs 10 lakh. After GST has been introduced, the same limit has been kept at Rs 20 lakh. This means that the landlords have a leeway of Rs 10 lakh under the GST regime.

The GST rate has been kept at 18 per cent for commercial property on the taxable value, where the leasing activity would be considered akin to supply of services. However, this rule will not apply to charitable or religious trusts which own and manage a religious place being used by common people. But this exemption will apply only in cases where the rent of the rooms is less than Rs 1000/day, the rent of shops meant for business purpose is up to Rs 10,000/month and in cases where the community hall is let out for up to Rs 10,000/day.


The current provisions for tax deduction on income tax for the rented property

The person or the company that has taken a property on rent has to pay the GST to the person or the company that has given out the property on rent. The company or person who is paying the GST has to deduct income tax at source at the rate of 10 percent. This is called TDS. There will be no GST applicable on the TDS.


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