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April 20, 2020

GST on Renting of Immovable Property from April 2020

by facelesscompliance in Compliance Law, GST, GST Circular Notification

GST on Renting of immovable property from April 2020

With the implementation of Goods and service tax in India a structured system of collecting taxes from various sectors has come into places. Renting of Immovable property is no exception to this new implementation. Before heading ahead in understanding  the implementation of GST let us first understand what is meant by an immovable property, It is a an immovable object  or property attached to the earth like a piece of land or house which cannot be moved unless altered or destroyed. GST is applicable on immovable properties. The type of GST to be charged that’s is CGST and SGST or IGST shall depend on the place of supply of the service.

Before implementation of GST the land lord earning rent of more than Rs. 10 Lakhs had to pay service tax to the government on the taxable amount. In case the rent was less than Rs. 10 lakhs then the land lord was exempt from paying tax on such rental income. Under the GST regime the mechanism has changed completely for the benefit of property owners. After the introduction of GST, the threshold limit of taxable turnover has been increased  from 10 lakhs paid in the old tax regime to Rs. 20 Lakhs. Means no tax on rental income up to 20 lakhs, this provision helps many land lords stay out of the GST ambit. The applicability of GST on rental income depends on the nature of asset or property.

The various services related to renting of immovable property is covered as under:

Renting of Immovable property for residential or commercial purpose:

In pre-GST era if a land lord is earning rent of more than Rs. 10 lakhs then he has to pay service tax on such rental income irrespective of whether the property is used for residential purpose or commercial purpose. But after implementation of GST the taxable limit is increased to  20 lakhs also the taxability of rent depends on from which type of property it has been earned. As per notification no 12/2017-Central tax dated 28-06-2017, services by way of renting of residential dwelling for use as residence is exempt from GST. However, renting of property for commercial purpose is taxable under GST.

Renting of Precincts of a religious place:

GST has given relief to trust and religious organization if such trust is registered under section 12AA of the Income tax act, 1961 and also certain other condition as explained further. As per entry 13 of notification no 12/ 2017-CT(rate), Services by way of renting of precincts of a religious place meant for general public owned or managed by a charitable trust registered u/s 12AA or Trust registered u/s 10(23C)(v) or authority covered u/s 10(23BBA) of the Income tax act 1961, if:

  1. the renting of rooms where charges not more than Rs. 1000 per day
  2. in case of renting of community hall or Kalyanamandapam or an open area and the like where charges are not more than Rs. 10000 per day

Hence, from above we can see that service of renting of room is exempt if room rent is less than Rs. 1,000 per day and in case service of renting of community hall shall be exempt if the rent per day is not more than Rs. 10,000 per day.

For instance, XYZ trust is a trust registered u/s 12AA of the income tax act 1961, has provided the following services during the month of for FY 2019-20:

Service of renting of Immovable property for residential purpose of Rs. 1,00,000

Service of renting of Immovable property for commercial purpose of Rs. 3,00,000

Service of renting of hall or Kalyanamandapam for Rs. 6,00,000 (Charges per day is Rs. 11,000)

Service of renting religious place at Rs. 1,20,000 (charges per day is Rs. 800 per day)

Let us now consider the taxability of above service and amount of taxable supply on the hands of XYZ trust:

ServicesTaxabilityAmount
Service of renting of Immovable property for residential purposeFully exempt0
Service of renting of Immovable property for commercial purposeTaxable3,00,000
Service of renting of hall or KalyanamandapamFully Taxable as charges per day is more than Rs. 10,0006,00,000
Service of renting religious placeFully exempt as charges per day is less than Rs. 10000
Total value of supply for FY 2019-209,00,000

Summary of services relating to immovable property is as below:

ServicesTaxable/ Exempt
Transfer of development rights and floor space index for construction of residential apartmentsTaxable
Renting of Immovable property for residential purposeExempt
Renting of Immovable property for commercial purposeTaxable
Renting of Precincts of a religious place with rent per day not more than Rs. 1000 per day by trust or charitable trust registered u/s 12AA of the income tax act, 1961Exempt
Renting of Precincts of a religious place with rent per day more than Rs. 1000 per day, by trust or charitable trust registered u/s 12AA of the income tax act, 1961Taxable
Renting of hall or Kalyanamandapam or an open area of a religious place with rent per day not more than Rs. 10,000 per day, by trust or charitable trust registered u/s 12AA of the income tax act, 1961Exempt
Renting of hall or Kalyanamandapam or an open area of a religious place with rent per day more than Rs. 10,000 per day, by trust or charitable trust registered u/s 12AA of the income tax act, 1961Taxable

Place of supply in case of Immovable properties:

In case the Location of suppliers and recipient are located in India:

As per section 12(3) Services provided in relation to immovable property including services provided by architects, interiors decorators, surveyors, engineers, Other experts or estate agents, service of grants of rights to use immovable property, carrying out/ co-ordination of construction work, then the place of supply shall be location at which the immovable property is located.

Where the location of immovable property is outside India then the place of supply shall be the location of the recipient.

In case the Location of suppliers or recipient are located outside India:

As per section 13(4) Services provided in relation to immovable property including services provided by architects, interiors decorators, surveyors, engineers, Other experts or estate agents, service of grants of rights to use immovable property, carrying out/ co-ordination of construction work, then the place of supply shall be location at which the immovable property is located.

Summary of place of supply relating to immovable property can be as below:

Place of supply in case location of suppliers and recipient are located in India

ServicePlace of supply
Services provided in relation to immovable property including services provided by architects, interiors decorators, surveyors, engineers, Other experts or estate agents, service of grants of rights to use immovable property etc. in IndiaLocation of Immovable property
Where supplier and recipient of service are in India and the immovable property is located outside IndiaLocation of the recipient
Place of supply in case location of suppliers and recipient are located outside India
ServicePlace of supply
Services provided in relation to immovable property including services provided by architects, interiors decorators, surveyors, engineers, Other experts or estate agents, service of grants of rights to use immovable property etc. outside IndiaLocation of Immovable property

For instance.

  • Mr. X is a resident of Mumbai, Maharashtra and has provided Architect service to Mr. Y of New York (USA) taxable value of such supply is Rs. 80,000. As per section 12(3) the place of supply shall be the place where the immovable property is located i.e. New York. hence the service supplied by Mr. X is exempt under GST. As export of service is exempt under GST
  • Mr. X is a resident of Mumbai, Maharashtra has rented out his property in Pune to Mr. Y of Gujarat. Here, the place of supply shall be the location where the property is located i.e. Pune. Hence, Mr. X will charge Maharashtra State GST and CGST at the time of billing to Mr. Y. In this case if Mr. Y is registered person in Gujarat than he cannot get setoff of Maharashtra SGST as SGST of two different state cannot be set off against each other.