The government is arming itself with powers to levy goods and services tax (GST) on all rental income but is unlikely to impose the tax on individuals renting out homes. Currently, service tax is levied on rental income from commercial property, but not levied on residential property.The Central GST (CGST) Bill — one of the four legislations introduced in Parliament — provides that 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.Waman Parkhi, a senior tax consultant at KPMG, however, said that in the final rules, the government may exempt residential rental income from GST. The government has introduced the bill which will be followed by detailed rules where exceptions and exemptions are likely to be built in, he said. If the existing system of not taxing rental incomes from residential property under service tax has to be continued, then the same provision of exemption has to be introduced in GST too.“Any law has to be read with the rules. It should not be seen in isolation,” said MS Mani, senior director at Deloitte. He said that at best the government can impose GST on residential property taken on rent by companies, which can then use it as a tax credit. In any case, GST kicks in at Rs 20 lakh and only some residential property fetches that kind of annual rent.GST, which is likely to be rolled out from July 1, will subsume central excise, service tax and state VAT among other indirect levies on manufactured goods and services. A senior urban development ministry officer clarified that GST will not lead to any additional tax on end-users. He said finance ministry has already accepted it inprinciple.GST rate on housing is expected to be pegged at 18% with a final decision expected to be announced over next few weeks. Developers and tax experts said this rate will be acceptable to all the stakeholders as it will not lead to any increase in the final price of property. CREDAI president Getamber Anand said that at present the levy is around 12% of project cost paid as excise and Vat. In addition, at the time of sale, buyers pay around 6% of the price as service tax and Vat. So, the total net outgo is around 18%.At present, while levying service tax on constructed house, an abatement of 60% of the total value is allowed to exclude the value of land and other goods such as bricks, cement and other material from the ambit of service tax. But under the new regime, a consultant said, this would not be required.Affordable housing is exempted from service tax. To pass on current benefits to buyers, Parkhi said that GST on the ready to move-in houses in the affordable segment will have to be pegged at zero. The GST Bill has also clearly defined that the tax will not be levied on sale and purchase of immovable property like land, house and other real estate assets, which are not under construction.