According to the new GST regulations that became effective on July 18, a tenant who is registered for the GST is required to pay Goods and Services Tax at a rate of 18% when renting a property. The new guidelines do not, however, apply to every tenant. The government made it clear that only when a residential unit is rented to a business entity will the GST be assessed.
Previously, the GST only applied to commercial real estates, such as offices or retail premises that were leased or rented out. Rent or lease payments made by corporations or private individuals on residential premises were exempt from GST.
The government said on Friday that residential units will not be subject to GST if they are rented to individuals for personal use.
The following information will inform you of the new GST restrictions that affect tenants:
-GST tenants are now forced to pay an additional 18% tax when renting a property for business purposes. The GST is not the responsibility of the property owner.
-A renter who operates a business out of a residential rental property must pay GST tax at the rate of 18%.
-A tenant will be required under the Reverse Charge Mechanism to pay tax (RCM). The GST paid under the Input Tax Credit program may be deducted by the tenant.
-Both private individuals and businesses can be renters who have registered for GST.
-For those who operate a business or profession with annual revenue above the threshold, GST registration is required.
-Companies and professionals who have rented or leased residential homes would be impacted by the new GST rule.
-In the past, only rented commercial assets like offices or retail premises were subject to GST.
Who is exempt from the 18% GST house rent tax?
Only when the residential unit is rented to a business entity is GST assessed. When it is rented to a private person for personal use, there is no GST. The government stated that there is no GST even if the owner or partner of the company rents a home for personal use.