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GST for residential property used for commercial purposes

GST for residential property -In a recent decision, the Rajasthan bench of the Authority for Advance Rulings (AAR) clarified how taxes work when someone uses a business house and is registered for Goods and Services Tax (GST).

The Case of Deepak Jain

Old Rules versus New Rules

Deepak Jain rented his place to a company doing office work. Before July 17, 2022, if you rented a living home, there was no tax, but for businesses, there was an 18% tax. After July 18, 2022, things changed. Renting homes for living now has a tax using a different method, but only if the person renting is registered for GST.

Sorting Out Lease Agreements

Even though local authorities said Jain’s property was for living, his agreement with the company stated it was for business. The AAR said that, despite local rules, what matters most is how the property is mainly used for business.

What the Ruling Means for Taxes

How Much Tax and Who Pays

Renting for business now has an 18% tax, and the person renting out the place has to pay this tax directly.

AAR’s Opinion on Home Definition

The AAR decided that Jain’s property doesn’t count as a home for tax purposes because it’s used for business, following rules from July 13, 2022.

Figuring Out the Property’s Nature

The AAR highlighted that how the property is used and how long people stay there determine if it’s seen as a home or a business space.

Conclusion: A Guide to GST Rules

To sum it up, the AAR’s decision helps people renting homes for business understand GST better. The main lesson is that the key factor is how the property is mostly used for business. Keeping up with such rules is crucial for making smart choices in the world of taxes.

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