Service by way of renting of residential dwelling to a registered person is now covered under Reverse Charge Mechanism (RCM)
[Amendment in Reverse Charge Mechanism under Section 9(3) of CGST Act vide Notification No. 05/2022-CT (Rate) dated 13.07.2022, w.e.f. 18.07.2022]
Please note that the Government has amended the original Notification No. 13/2017-CT (Rate) dated 28.06.2017 by way of issuing a new Notification No. 05/2022-CT (Rate) dated 13.07.2022. As per this new Notification, a new service has been added 5AA in Notification No. 05/2022-CT (Rate) dated 13.07.2022 “service by way of renting of residential dwelling to a registered person”.
The relevant amendment in this notification is as under:-
“(3) after serial number 5A and the entries relating thereto, the following serial number and entries shall be inserted, namely: –
| (1) | (2) | (3) | (4) |
| “5AA | Service by way of renting of residential dwelling to a registered person. | Any person | Any registered person” |
As per Sl. No. 12 of Notification No. 12/2017-CT (Rate) dated 28.06.2017 ‘Services by way of renting of residential dwelling for use as residence is exempt supply.
Before the Notification No. 05/2022-CT (Rate) dated 13.07.2022, So, if residential dwelling is given on rent for commercial purposes than it is not exempt supply and service is covered under forward charge basis i.e. supplier has to charge GST on forward charge basis. But after the Notification No. 05/2022-CT (Rate) dated 13.07.2022, even supplier is a registered person, GST is payable on RCM basis. Please note that if any person (whether registered or not) gives service by way of rending of residential dwelling to a registered person, GST is payable on reverse charge basis. This notification specified only renting of residential dwelling and does not speak about the use of same i.e. residential dwelling may be used for residential purpose or commercial purpose.
For example: if a person (whether registered of unregistered) gives his residential dwelling to a registered person, then GST shall be payable on RCM basis. It does not matter that recipient use this property for residential or commercial purpose. Earlier residential dwelling is given on rent for commercial purposes than it is not exempt supply and service is covered under forward charge basis i.e. supplier has to charge GST on forward charge basis.
But now the question is that after Notification No. 05/2022-CT (Rate) dated 13.07.2022, the exemption by way of Notification No. 12/2017-CT (Rate) dated 28.06.2017 in case of ‘Services by way of renting of residential dwelling for use as residence shall continue or not. Or exemption shall be in case of only, if residential house is given to an unregistered person (not registered person) for use as residence only.
As per my view and understanding:
1. If residential house/property is given to an unregistered person (i.e. not to registered person) for use as residence only, then the exemption by way of Notification No. 12/2017-CT (Rate) dated 28.06.2017 shall remain continue. Or
2. If residential house/property is given to an unregistered person (i.e. not to registered person) for use as commercial purpose, then the exemption by way of Notification No. 12/2017-CT (Rate) dated 28.06.2017 shall not be granted and supplier has to charge GST on forward charge basis.
3. If residential house/property is given to a registered person for any purpose whether residential or commercial, GST shall be payable on RCM basis by way of Notification No. 05/2022-CT (Rate) dated 13.07.2022.
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If registered person uses for sole residence purpose and debits his rental expenses to drawings… whether RCM applicable? if yes whether we will be able to claim input (ITC)even if not used for business purpose.