09, December, 2017
According to the provision of the GST Act, renting out of an immovable property would be treated as a supply of services and thus fall under the ambit of GST. However, GST would not applicable if the property is rented out for residential purposes. Thus, if the property is let out for commercial/business purposes, it would attract GST at the rate of 18%, provided the landlord’s annual income (from provision of services) exceeds Rs 20 lakh. Brokerage services are also subject to GST at the rate of 18% provided the broker’s annual income (from provision of services) exceeds Rs 20 lakh.
While the renting of residential property would continue to be exempt from service tax the GST regime, there is a likelihood that the rentals for residential property may go up under the GST regime, especially for cities like Mumbai, considering the fact that the cost for the purchaser of a residential property is likely to increase under the GST regime.
On the another hand if stamp duty is considered , It is calculated on the agreement value of the property or the ready reckoner value, whichever is higher and is currently levied at a base rate of 5% in Mumbai. There is no concession given for secondary transactions. It is pertinent to note that the registrar considers several factors while arriving at the ready reckoner value of the property, such as type of property (flat/independent house), usage of property (commercial, residential), depreciation of the property, etc. The calculation of depreciation factors in age of the building – higher the age of the building, lower the value after depreciation.