The 47th GST Council meeting held on 28–29 June 2022 which coincided with the fifth anniversary of GST implementation was a significant meeting discussing various crucial matters including modification to Form GSTR-3B, rate revisions, and withdrawal of exemptions, inversion corrections, and IT-related measures. One such decision taken was to withdraw the exemption in respect to ‘Renting of a residential dwelling to registered business entities.
Following the recommendations by the GST council in the 47th GST Council Meeting, government vide Notification no. 05/2022-Central tax (rate) dated 13th July 2022 made the necessary amendment by inserting clause 5AA as under and this notification shall come into force with effect from 18th July 2022.
| (1) | (2) | (3) | (4) |
| “5AA | Service by way of renting of a residential dwelling to a registered person. | Any person | Any Registered person” |
Let’s compare the old situation and the new situation:
| Particulars | Old Provisions | New Provisions w.e.f. 18.07.2022 |
| Rental on Commercial Property (No change in provisions) | ||
| GST Applicability | Yes | Yes |
| GST Rate | 18% | 18% |
| Liability to charge GST on the landlord | Yes, if the landlord is liable for registration | Yes, if the landlord is liable for registration |
| Liability on Tenant | No | No |
| Rental on Residential Property | ||
| GST Applicability | No | Yes |
| GST Rate | NA | 18% |
| Liability to charge GST on Landlord | NA | No |
| Liability on Tenant | NA | Yes, under Reverse Charge Mechanism (RCM), only if the tenant is a registered person. |
Frequent Asked Questions:
Q1: If a salaried person is taking residential property on rent from a registered landlord, will there be the applicability of GST on such transactions?
Ans: GST will not be applicable in such a case. GST is to be deposited only if the recipient is registered under GST Law, irrespective of the fact whether the landlord is registered under GST laws or not.
Q2: If both the supplier and receiver are registered under GST and the residential dwelling is taken on rent, who will be required to deposit the GST?
Ans: Even if both the parties are registered under GST law, the recipient will have to deposit the GST on rental @ 18% directly to the government under Reverse Charge Mechanism. However, the GST paid by the tenant can be claimed through an Input tax credit.
Q3. Suppose a company (registered under GST) has taken a residential flat on rent for its employees and the landlord is a GST unregistered individual, who will be required to deposit the GST?
Ans: In such a case, GST will have to be paid by the corporate entity, which is a tenant. However, if the employee directly takes the flat on rent, then it will outside the ambit of GST.
Q4. If both the supplier and recipient are unregistered, what would be the applicability?
Ans: In such a case, new GST norms would not be applicable.
Q5. If any person is registered under GST as a sole proprietorship concern and takes a residential flat for the purpose of residence on rent for himself/family, what would be the implications under GST?
Ans: This is an example of personal expenditure and not a business expenditure of the proprietorship concern. In such a case, GST will be paid under RCM but the ITC of the GST paid cannot be claimed as it is blocked under section 17(1).
Author – CA Mridul Gupta, MRIDUL GUPTA & CO, Chartered Accountant in Practice from Delhi and can be contacted at office@camridul.in).
Author Bio
I propose to rent my residential property to a registered co. and they would be depositing the GST on RCM.
Do I still have to register under GST if the rent exceeds threshold.
I am a retiree with no buisness income.
Hi sir, I have a query. Company registered in State A, took residential property on rent for Director in State B. Company is not registered in State B. Will company be liable to pay GST under RCM? If yes, will it pay IGST or CGST and SGST? Also, can company claim this GST paid? Pls reply.
Hi I am staying in shared apartments from Get set home they applied 12%GST on rent charges on all individual staying in apartment is this a right?
If so we paying tax at the end of the year who will get benefits.
Hi,
The notification is effective from 18.07.2022.
So, Should GST be paid under RCM for the the rent paid on 02.07.22 for July,2022 while filing the GST return?
Notification is applicable from 18.07.2022 and for transactions before that, no RCM is to be deposited.