GST Valuation of Rental Income


The government has introduced GST in India to implement a single tax structure that yields increased transparency and accountability. Like other sectors, GST impacted real estate and its various aspects such as construction, sale, purchase, lease, rent, etc. Moreover, various provisions were laid down for regulating GST on rental income such as taxable services under GST, place of supply, exception limits for GST in case of services, etc.
GST value is nothing but the amount of rent received from the commercial property owned by an individual. The commercial rent acquired must be more than Rs. 20 lakh a year. The amount of commercial rent less than Rs. 20 lakhs a year shall not be based on GST.

Impact of GST on Rent
The implementation of GST has rough out an organized approach to accumulate taxes from many sectors. Rent has been the primary source of income for many over the years. When you rent out a residential property for residential purposes, it is exempted from GST; any other type of renting out of the immovable property for business would bring GST at 18%, as it would be used as a supply of service.
After GST was executed, the verge limit for applicability of GST has been enlarged to Rs. 20 lakh from Rs. 10 lakh that was in the situation before GST. It makes many landlords who were earlier covered under the service tax regime to be moderated up to another Rs. 10 lakhs earned.

Situation before GST
Before GST, the landlord had to obtain a service tax registration if his total taxable service exceeds Rs. 10 lakh per year. As long as the rental income does not beat 10 lakh per year, the landlord would not be captivated by service tax.
Under the preceding tax regime, commercial properties alone that were let-out would attract service tax. It appeals even if a residential property is used for commercial purposes. Service tax was imposed at 15% of the rent for commercial properties.

Renting out a property attracts GST
According to the GST Act, leasing out of an immovable property would be managed as a supply of services. GST, however, will apply only to certain types of rent such as:
• When a property is given out on lease, rent, easement, or licensed to occupy.
• When any property is leased out including a commercial, industrial, or residential property for business (either partly or wholly), these types of renting are considered a supply of services that would attract tax.

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