Any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services. (schedule II of CGST Act, 2017)
Accommodation service provided by hotels, Lodges and guest house and Rent income is a taxable supply under GST.
However, services by way of renting of residential dwelling for use as a residence are exempted from GST.
Every supplier whose turnover exceeds Rs.20 lakh (10 lakh for specialSpecial category states include Arunachal Pradesh, Assam, Jammu & Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, Uttarakhand category states) should take registration in the State or Union territory in which his property (flat, house, hotel etc.) is located.
I repeat again!
Registration should be taken in the state where the property is located. However, if the landlord or lessor don’t have any other fixed establishment in the state, registration can be taken in the state of their residence.
Q 1: I earn annual rental income of Rs. 21 lakh from a residential property. Should i take GST rgistration? If yes, how much tax should I pay?
Ans: Yes, take GST registration and file GST return and show rental turnover under NIL rated supply.
Q 2: I live in West Bengal and earning Rs.26 lakh from have a Flat (commercial) in Bihar. I don’t have any other establishment in Bihar. Where Should I take registration and what tax should I pay ?
Ans: As you do not have a place of business or a fixed establishment in Bihar (State where the your commercial property is located) you have to take registration in Wes Bengal (State of your usual place of residence) and pay IGST.
Q 3: I provide homestay through oyorooms.com (E-commerce) and my turnover is Rs.8 lakh only. Am I exempted from GST registration?
Place of Supply
- Place where Immovable property is located or intended to be located; or
- Location of recipient if immovable property is located outside India
Place of supply will determine which GST to be charged. If the place of supply is out of the state of registration, IGST should be charged and if it is in the Supplier’s state, CGST+SGST should be charged. Learn about its accounting – Here.
Rate of GST
Below rates apply if the rental income exceeds 20 lakh (10 lakh for northeast states) and registration is obtained by the lessor or landlord. Tax is payable by landlord or lessor and he has the right to collect tax from the tenant or lessee.
- For services by way of renting of residential dwelling for use as a residence.
- Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having declared tariff of a unit of accommodation below Rs.1000/- per day or equivalent.
Accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes having room tariff Rs.1000 and above but less than Rs.2500 per room per day
- Any lease or renting out of immovable property for business or commercial purpose
- For Renting of premises in bundled service like a hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organizing a function.
- For accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes where room tariff of Rs 2500/- and above but less than Rs 7500/- per room per day
- For accommodation in hotels including 5 stars and above rated hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, where room rent is Rs 7500/- and above per day per room.
Note: Declared tariff means gross tariff without deducting discounts.
Income Tax’s TDS should be calculated on rental income excluding GST.
Recommended to Read: Income Tax on Rent
Often hotels provide foods or meal along with their accommodation service. This natural combination of two services is known as composite supply.
As per section 2(30) of CGST Act, a composite supply means a supply of two or more taxable goods or services or both, which are naturally bundled and supplied together in the ordinary course of business.
In this type of transaction, we need to identify the PRINCIPLE SUPPLY which will help us to determine the GST rate for the whole transaction.
Example: Under an offer at Hotel Taj, Mr.Ram books a room with Lunch at Rs.10,000 (excluding GST). The tariff rate of the room was Rs.9,000 (without GST) and Restaurant rate of that lunch was Rs.1,500 (without GST). GST rate of Hotel is 28% and Restaurant is 18%.
Calculate net GST amount.
Solution: Here principle supply is accommodation service by the hotel so GST rate of the hotel will be applied on the whole transaction amount.
Therefore, GST payable = Rs.2,800/- (10,000 * 28%)
Q 1: Will GST be charged on actual tariff or declared tariff for accommodation services?
Ans: Charge GST on the amount charged from customer i.e Transactional value. Declared or published tariff is relevant only for the determination of the tax rate slab.
Q 2: My hotel’s tariff rate is Rs.6,000 (without GST) only but when a customer demand 2 extra bed in the same room we charge them Rs.8000 (Excluding GST). What would be my GST rate.
Ans: GST shall be charged at 18% on Rs. 8000.
Q 3: Where will the declared tariff be published?
Ans: Tariff can be declared anywhere like-
- The official websites
- Tariff card (printed)
- Display at the reception
In case different tariff is declared at different places at a single point of time, highest of such declared tariffs shall be the declared tariff for the purpose of levy of GST.
In case different tariff is declared for different seasons or periods of the year, the tariff declared for the season in which the service of accommodation is provided shall apply.
Q 4: If tariff changes between booking and actual usage, which rate will be used?
Ans: Declared tariff at the time of supply would apply. Let’s see an example
Example: Where invoice is issued within 30 days of provision of accommodation service
Date of Issue of Invoice -1st October 2017
Date of accommodation of Services -15th September 2017 (irrelevant)
Date of receipt of payment -1st August 2017 (Advance booking)
Solution: Time of supply of services is 1st August 2017 i.e earlier of invoice date and payment date. GST rate on 1st August 17 will be charged.
Q 5: My hotel’s tariff rate is Rs.10,000 (without GST) and after discount, I charge my customer Rs.6000 only. What will be the GST rate.
Ans: GST would be levied @ 28% on Rs 6000/-
Source: Circular No. 27/01/2018-GST