GST tweak on commercial rentals to bring higher revenue for govt: Experts
The latest change announced by the Goods and Services Tax (GST) Council regarding taxing rental income from commercial property is likely to improve the government’s tax revenue. But, this may prove costly for tenants, according to industry experts. Renting commercial property owned by a person not registered with the GST Authority has been brought under the reverse charge mechanism (RCM), according to an announcement made on September 9 after the Council's 54th meeting. This would mean that the commercial tenant will have to deposit the GST.
Earlier, no GST was applicable in such cases. If the landlord was a registered entity, they were liable to pay GST at 18 per cent. It was also the case when a residential property was being used for commercial purposes.“This significant policy shift places the GST payment responsibility on tenants, enhancing government GST collection and marking a notable advancement in commercial property rental regulations,” said Ankit Kansal, managing director at 360 Realtors.
According to Shrinivas Rao, fellow of the Royal Institution of Chartered Surveyors and chief executive officer at commercial real estate consultant Vestian, the earlier mechanism caused significant revenue leakage for the government.
