The real estate sector has historically been prone to litigation on several aspects, including but not limited to its taxability under Service tax , Value Added Tax ('VAT'), taxability of renting of immovable property, etc.However, in the midst of such litigation in this sector, one consistent factor has been the non-levy of service tax on renting of residential property Under the existing service tax legislation, the negative list of services (i.e. the list of services on which service tax is not leviable) includes renting of residential dwelling for use as residence.On a happy note, the recently circulated list of exempted services under Goods and Services Tax ('GST') includes these services too thereby implying that the rental income from residential properties used for residential purposes would continue to be exempted even under the GST regime.Thus, while there will be no output tax on these services, it is important to understand whether the changing indirect tax scenario under GST regime is likely to have any impact on the rentals Purchase of a residential premises under the existing regime attracts a Service tax of 4.5% for a flat whose value exceeds INR 1 crore and 3.75% of the value of the flat whose value is upto INR 1 crore. In addition to this, purchase of a flat attracts a VAT of 1% in certain states like Maharashtra. As opposed to this, purchase of a residential property under GST regime is likely to attract 12% GST (being a summation of 6% Central GST and 6% State GST).This being the case, purely from an output tax perspective, the increase in tax on a flat costing INR 1 crore is likely to be 6.5% (12% GST less 4.5% Service tax and 1% VAT). However, it is important to note that a developer constructing a flat is likely to be eligible to higher credits under GST regime as opposed to the current regime.This is because under the current regime there are restrictions in availment of credits whereas under GST a developer would be eligible to avail entire credits on procurements. Such increase in/ additional credits, in a city like Mumbai, is likely to be around 2 to 2.5% of the cost of the property.The below table indicates differential cost on the rental income under the existing regime and the GST regime.*Note: Stamp duty has been ignored as the same continues to be leviable even after GSTN.A-Not Applicable.It can thus be observed that while the renting of residential property would continue to be exempt from service tax even under 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.The above article does not constitute legal advice and the views expressed herein are personal views of the authors.: The facts and opinions written in this column are those of the author and do not reflect the views of economictimes.com.