In the context of rental income and GST, the responsibility for paying GST typically falls on the landlord or property owner. However, the tenant may be indirectly affected, as the landlord usually includes the GST amount in the rent charged. Below is a breakdown of who pays GST and the role of GST registration in Bangalore for both landlords and tenants.
1. Landlord’s Responsibility for GST Payment
For commercial properties and certain other rentals, it is the landlord who is required to pay the GST on the rental income. The landlord must obtain GST registration in Bangalore if their total taxable rental income exceeds the threshold limit of ₹20 lakhs per annum.
Once registered for GST, the landlord is responsible for collecting the tax from the tenant and remitting it to the government. For instance, if a commercial property is rented out, the landlord charges GST at the rate of 18% on the rent. This means the landlord collects the GST from the tenant and later deposits it with the government.
2. Tenant’s Role in Paying GST
While the landlord is the entity liable to register for GST and remit the tax, the tenant effectively bears the cost of the GST. This is because the GST is added to the rent, so the tenant pays the rental amount plus the applicable GST. For instance, if the rent for a commercial property is ₹30,000 per month, and the applicable GST is 18%, the tenant will pay ₹30,000 plus ₹5,400 in GST, totalling ₹35,400.
It’s important to note that tenants in certain situations may also be able to claim input tax credits (ITC) on the GST paid, especially if they are registered businesses using the rented space for business purposes.
3. GST Registration Requirement
If you are a landlord with rental income exceeding ₹20 lakhs, you must complete online GST registration in Bangalore. This process involves submitting the necessary documents and details to the Goods and Services Tax Network (GSTN) to obtain your GST registration certificate. After registration, you will need to charge GST on applicable rentals and comply with GST filing requirements, including submitting returns.
4. Voluntary GST Registration
Landlords who rent out commercial properties may choose to voluntarily register for GST even if their turnover is below ₹20 lakhs. This can be beneficial if they wish to avail of input tax credits (ITC) for expenses related to property maintenance and other operational costs. Voluntary GST registration in Bangalore can also help streamline tax processes and ensure smoother operations for landlords with multiple properties.
In short, the property owner (landlord) must collect GST from the rent payer, which will be calculated on the rent charged. Additionally, if the annual rent exceeds ₹2.40 lakh, the rent payer is required to deduct income tax at a rate of 10% at source, starting from the Assessment Year (AY) 20-21.
Conclusion
In summary, the landlord is responsible for paying GST to the government, but the tenant typically bears the cost through the rent they pay, which includes the GST. Landlords must obtain GST registration in Bangalore if their rental income exceeds ₹20 lakhs, and they are required to collect and remit the GST.
Tenants, particularly businesses, may be eligible to claim ITC for the GST paid on rent, depending on their business activities. Understanding these responsibilities helps both parties stay compliant with tax regulations and ensures the smooth running of rental agreements.
