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Rented houses 18% more expensive: If you live on rent, understand the new GST rules, who will have to pay tax and who will get exemption?

The government has made some rules regarding whether people who rent have to pay GST or not. In the meeting held last month, several changes were made in the GST rules. These changes came into effect from July 18. Earlier, when an announcement was issued on July 13, it was not clear to the public when and under what conditions tenants would have to pay GST. Now we are telling you the answer to all the questions related to this. Let’s find out one by oneā€¦

What is GST? GST stands for Goods And Services Tax. In Gujarati we can call it ‘Mal-Seva Kar’. You have to pay GST on purchase of any item or purchase of any service. GST came into force in India from 1st July, 2017.

Many media reports are claiming that all tenants have to pay 18% GST on house rents, is this true? PIB’s fact checking arm i.e. Press Information Bureau has tweeted in this regard. It has been said that this news is false. An attempt is being made to mislead people by this, only under certain circumstances tenants will have to pay GST.

If a landlord is not GST registered and rents his house to a GST registered, what does the rule say? As per the new rules if a non-GST registered person i.e. job worker or small trader gives his house to a GST registered person (say a company), GST will be charged on the rent. This means that under the reverse mechanism the tenant will have to pay 18 per cent GST on the rent.

In many cases, it has been observed that people with even lower turnover have registered for GST. This is because it allows their customers or clients in the supply chain to claim input tax credit. Now you must be wondering what is this input tax credit? Let’s understand this too. Actually, input tax credit in GST refers to a system where you get credits against GST paid somewhere earlier i.e. even if you need to pay GST later, you can use these credits in lieu of money. With the help of these credits, the tax is reduced. For example, I do not have to bear the burden of paying tax repeatedly on a single product business.

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