12 Oct 2017Posted By: Arvind

GST on Rent | Impact of GST on Rental Income from Immovable Property

Impact on Rental Income from Immovable Property in GST Regime

'Generating rental income from the renting of immovable property' has been included in schedule II which outlines it as the supply of services under Goods and Service Tax Regime. The GST rate prescribed on the said service is 18 percent. Though, the Exemption Notification no. 12/2017 dt. 28.06.2017 (the entry number 12 of Exemption Notification) exempt the said services of renting of residential dwelling only for the purpose of residential accommodation, in any case, if the residential dwelling is let out or leased out for any commercial purposes then notwithstanding anything contained in the above notification shall not apply. In other words, the no exemption will apply and the rental income earned from such residential property for letting out for commercial activity shall fall under the purview of GST and will liable to be taxed.

Supply is Interstate or Intrastate, a tricky proposition

The concept whether the supply of service is intrastate or interstate is new so far as services are concerned. In pre GST period, there was no concept of State Tax on services as service tax was a Central Tax. But after the implementation of GST, the supply of services are subject to State Tax as well as Central Tax in the same manner as in the case of supply of goods. With this shift in the structural design of the taxes the need to split the supply of services into intrastate supply and interstate supply has ascended such that the share of state tax can go directly to the concerned State (the State in which service has been consumed).

GST in case of Rental income deriving from Commercial lease/Let Out/Renting 

Under the new GST norms, GST will be levied on commercial rental beyond Rupees 20 lakh. Anyone earning Rupees 20 lakh or more in a financial year from leasing or renting commercial property, will have to pay GST.

As per the Revenue Secretary, if any house property is being let out for any commercial purpose (for shop or office purpose), no GST will be levied up to Rupees 20 lakh. However, where the rental income derived from the residential house is exempt from the scope of GST. But where the assessee has given his unit to any commercial enterprise, then it is liable to GST if the assessee is getting more than Rs 20 lakh as rent. The taxpayer has to register with the GSTN and pay taxes.

However, the said exemption (Exemption Notification no. 12/2017 dt. 28.06.2017) shall not be applicable to supply of services like renting of rooms where room rent charges are Rupees 1000 per day or more, renting of community halls, premises, Kalyanmandapam or open area, etc where charges are Rupees. 10,000 per day or more. In addition, no GST on the supply of services by way of renting of precincts of a religious place meant for the general public by a person. So the GST rate on Services way of renting of precincts of a religious place meant for the general public is to be taken as nil.


As per records, nearly about 69.32 lakh taxpayers registered under central excise, service tax and VAT have migrated to the GSTN portal up to 10th of July 2017. Though, in the pre-GST phase, there were over 80 lakh assessees registered under the earlier indirect tax regime. Out of the 69.32 lakh migrants, 38.51 lakh have completed the registration process and the certificate of registration is being issued to them. However, to the remaining 30.8 lakh taxpayers, SMS and emails have been sent by GSTN so that they complete the GST registration process by providing their required details (Details like promoter’s details, main place of business, and additional place of business).


Moreover, approximately 4.5 lakh and above new taxpayers have registered on the GSTN portal since June 25.




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