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Who will pay 18% GST? The government has cleared doubts on the new rules

Amid reports on 18 per cent GST on house rent for tenants, the government on Friday clarified that the rent of a residential unit is taxable only when it is rented out to a business entity and said no goods and services tax will be levied when it is rented out. To a private individual for personal use. It added that GST will not be levied even if the owner or partner of a firm rents out the residence for personal use.

As per the recommendations of the 47th GST Council meeting which came into effect from July 18, a GST-registered tenant will have to pay 18 per cent goods and services tax on renting out a residential property. However, input tax credit can be claimed in respect of such transaction as it is for personal use.

Abhishek Jain, partner (indirect tax), KPMG in India, said, “This is a welcome clarification from the government which will prevent unnecessary panic where people were under the mistaken belief that residential rent of immovable property of unregistered persons will also attract GST.”

He added that more importantly, this clarification provides much-needed relief to GST-registered owners or partners of GST-registered firms who rent immovable property for their personal use, such as renting a house for family accommodation, in which case the government has rightly clarified that GST will not apply.

Earlier, only commercial properties such as offices or retail premises rented out attracted GST.

Pranjal Kamra, CEO, Finology Ventures, said, “Previous iterations of the GST rules taxed commercial properties like offices, retail spaces, etc. Under the new rules, however, rent paid for residential property will attract GST as well as business. Tax liability will fall only on GST-registered assessees, i.e., those/firms who are already liable to file their GST returns; But not the owner of residential property.”

He added that the new rules will make taxable businesses operating in residential properties, which use their own houses or similar properties to avoid paying GST under the previous version of GST rules.

The GST Council, which met in its 47th meeting at the end of June, decided to accept the interim report of the ministers on duty reversal and revision of exemptions. Pre-packaged and pre-labelled retail packs including curd, lassi and butter milk were brought under GST, effective July 18.

It has decided to levy 5 percent GST on room rent in hospitals excluding intensive care unit (ICU) rooms, excluding intensive care units (ICUs) above Rs 5,000 per patient, without input tax credit. The Council decided to levy 12 percent GST on all types of maps and hydrographic or similar charts, including atlases, wall maps, topographic plans and globes.

It was decided to levy 18 percent GST on fees charged by banks for issuing checks (loose or book form); Currently bring hotel rooms below Rs 1,000 per day under the 12 per cent GST slab as opposed to the tax exempt category.

GST on petroleum/coalbed methane has been increased to 12 percent from 5 percent earlier. Tax on e-waste has also been increased from 5 percent to 18 percent. GST exemption on services extended by RBI, Irdai, Sebi, FSSAI and GST has also been withdrawn. Tax on scientific and technical equipment supplied to publicly funded research institutes has been increased from 5 per cent to “applicable rates”.

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