Gst on Tenancy Agreement


The Goods and Services Tax (GST) has become an important part of the Indian taxation system since it was implemented in July 2017. It has impacted several sectors, including the real estate industry. One area of the real estate industry that has seen significant changes due to GST is tenancy agreements.

Under the GST regime, tenancy agreements are subject to tax. GST is applicable on the rent paid by the tenant for the use of the property. However, the application of GST on tenancy agreements depends on several factors such as the type of property, the nature of the tenancy agreement, and the status of the landlord.

GST on Residential Property

Residential properties that are rented out for residential purposes are exempted from GST. This means that if a tenant rents a residential property for residential purposes, there will be no GST charged on the rent paid by the tenant. However, if the landlord provides any additional services such as maintenance, housekeeping, or any other services in addition to the rent, then GST will be applicable on these additional services.

GST on Commercial Property

Commercial properties, on the other hand, are subject to GST on rent paid by the tenant. If a tenant rents a commercial property for commercial purposes, then GST will be charged on the rent paid by the tenant. However, if the landlord does not fall under the threshold limit of INR 20 lakhs, then GST will not be applicable.

GST on Leasehold Property

Leasehold properties are properties where the land on which the property is built is owned by the government or any other party, and the land is leased to the property owner for a certain period. In the case of leasehold properties, the lease rent paid by the tenant is subject to GST.

GST on Joint Development Agreement

A Joint Development Agreement (JDA) is an agreement between a landowner and a builder/developer, where the landowner contributes land, and the builder/developer contributes construction services. In such cases, GST is applicable on the consideration paid by the builder/developer to the landowner.

Conclusion

In conclusion, the GST on tenancy agreements depends on several factors such as the type of property, nature of the agreement, and the status of the landlord. It is essential to understand these factors while drafting a tenancy agreement to avoid any legal complications in the future. Therefore, it is always advisable to consult a legal expert or a tax consultant to understand the GST implications on tenancy agreements.