GST on rent

[Atul Saboo]

Landlord leasing commercial property earning more than Rs.20 lakh rent per annum.

Under which GST scheme landlord should register - regular or composition?

Please answer with reasoning and reference along with caselaw would help.

[VENU K]

If the landlord opts for composition scheme he is not allowed to collect tax from tenants and he will have to pay 6% tax from his pocket.

If he opts for regular scheme he can collect 18% GST from tenants and he will not have to incur any expenditure from his pocket.

Generally many small and unregistered tenants  would refuse to pay any GST. They will agree for a lumpsum amount as rent... GST or no GST. In such situations it will be better for landlord to opt for composition  and  pay 6 percent instead of 18 percent.

[Atul Saboo]

Sir, Thank you for the reply.

Is the landlord leasing commercial property and earning rent qualify as:

a) service provider or b) a supplier of services under GST?

Can a "supplier of services" qualify to register under the GST Composition Scheme?

[KASTURI SETHI]

Answer to both questions is yes. The major loss in opting for  composition scheme is that the service provider (supplier) cannot take ITC and  the service recipient (taxable person) cannot take ITC.

[Padmanathan KV]

I agree with detailed views of Ld. Venu Ji in Post 1.

Query 2: Yes, A person engaged in supply of service is eligible for composition scheme under Section 10(2A) of the CGST Act.

As far as ITC is concerned, in case of renting of property it is generally seen that ITC is very less. Mostly, ITC maybe available on some AMC or Security charges etc. 

[Ganeshan Kalyani]

I agree with the views of the expert.

[Shilpi Jain]

There are good number of conditions applicable for a person being a composition taxpayer. Ensure all those conditions are satisfied. 

Also whenever any of the conditions of composition scheme are not satisfied, one will have to pay GST under regular rates. This also has to be tracked and kept in mind.

Unless your tenant is not eligible for credit, suggested not to opt for composition scheme.

AI Summary

Landlords earning over Rs. 20 lakh must choose between GST regular or composition scheme; regular scheme often more beneficial. A landlord leasing commercial property and earning over Rs. 20 lakh annually must decide between the GST regular or composition scheme. Under the regular scheme, the landlord can collect 18% GST from tenants, while the composition scheme requires paying 6% from their own funds, as tenants may refuse GST payments. The composition scheme limits the landlord's ability to claim Input Tax Credit (ITC), and tenants cannot claim ITC either. Experts advise that unless tenants are ineligible for credit, opting for the regular scheme may be more beneficial. Compliance with all conditions of the chosen scheme is crucial.