No GST on residential unit if rented out for personal use: Finance ministry

NEW DELHI: Residential properties if rented out to private persons for personal use will not attract Goods and Services Tax, and no GST will be charged on food items sold loose, a finance ministry official said.

A section of media misreported that house rent paid by tenants will attract an 18% GST, which is factually incorrect, the official said.

The government’s official Twitter handle also clarified that renting a residential unit is taxable only when it is rented to a business entity.

“No GST when it is rented to private person for personal use. No GST even if proprietor or partner of firm rents residence for personal use,” the Twitter handle @PIBFactCheck – created to counter misinformation on government policies or schemes – said on Friday.

Similarly, there is a misinformation campaign that food items such as grains, curd and lassi have become costlier for the poor because these items have been brought under the 5% GST slab, the official said. “It has been already clarified that there is no tax on these items sold loose,” the official cited above said.

Pre-packaged and labelled commodities – such as pulses, wheat, rye, oats, maize, rice, flour, Suji, besan, puffed rice, curd and lassi — above 25kg weight do not attract GST. “They [kirana stores] can always buy in bulk and sell the same in small quantities without paying any GST,” he added.

Experts said there has not been any ambiguity on these matters, but clarifications can dispel doubts for laypersons.

“The interpretation of law since the beginning was very clear that GST was payable under the reverse charge mechanism when the residential property is being leased by a GST registered person (i.e. entity carrying out business/profession or an association, etc),” Saurabh Agarwal, tax partner at EY India said. The reverse charge mechanism puts liability to pay tax on the recipient of the supply of goods or services instead of the supplier.

Abhishek Jain, Partner Indirect Tax at KPMG in India, said the clarification will “prevent unnecessary panic where people were under the false belief that residential renting of immovable property to unregistered persons would also attract GST”.

“More importantly, this clarification provides the much-needed relief to GST registered proprietors or partners in GST registered firms who take on rent immovable property for their personal use, e.g. renting of a house for family accommodation, in which case the government has rightly clarified that GST will not be applicable,” he added.

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