Only GST-registered tenants face 18% tax on rent paid, say experts

One common query is what happens when a person not registered under GST rents a residential property to a person registered under GST

According to the new goods and services tax (GST) rules that came into effect on July 18, a tax of 18 per cent will have to be paid on residential property rent. This tax will be paid according to the reverse charge mechanism (RCM), which means the tenant will be liable to pay it.

Sandeep Bajaj, managing partner, PSL Advocates & Solicitors, says, “Renting an immovable property is treated as a supply of service under the GST Act. Hence, the rent, i.e., the consideration paid for the service, is liable to GST.”

The impact

The imposition of GST on rent