RCM on the provision of services by renting a residential dwelling to a registered person – On 28-29 June 2022, the GST council convened its 47th meeting and made some important decisions regarding the GST applicability for renting of residential dwellings. These decisions came into effect from 18 July 2022 and altered the GST rules for registered persons who rent residential dwellings for any purpose. The GST council decided to withdraw the GST exemption that was previously available for such transactions (Refer Notification No. 12/2017-CT(R) dated 28.06.2017) and instead introduced the reverse charge mechanism (RCM). (Refer ).
Under the RCM, the registered persons who rent residential dwellings have to pay GST @ 18% directly to the government on their own account and then claim the GST paid as an input tax credit in their returns. However, the GST exemption continues to apply to unregistered persons or those who rent residential dwellings for residential purposes only.
The GST Council resolved to create more clarity and avoid uncertainty, in its 48th council meeting dated 17th December 2022, decided that no GST is payable under RCM where the residential dwelling is rented to a registered person and if used for his/her personal purpose on personal capacity. (Refer Notification No. 15/2022-CT(R) dated 30.12.2022).
GST on renting of residential dwellings depends on whether the tenant is a registered person under GST and whether the rented dwelling is used for residential or commercial purposes.
- If the tenant is not registered under GST, then there is no GST on the rent of a residential dwelling, regardless of the purpose of use.
- If the tenant is registered under GST and uses the rented dwelling for residential purposes, then there is no GST on the rent of the residential dwelling.
- If the tenant is registered under GST and uses the rented dwelling for commercial purposes, then there is GST @ 18% on the rent of the residential dwelling. However, the GST liability is on the tenant under the reverse charge mechanism (RCM), and not on the landlord.
Conclusion: The GST applicability for renting residential dwellings depends on the registration status of the tenant and the purpose of use. Unregistered tenants face no GST liability, while registered tenants using dwellings for residential purposes are also exempt. However, if the rented dwelling is used for commercial purposes by a registered tenant, GST at 18% applies under RCM. Stay informed about these changes and navigate the complexities of GST rules for renting residential dwellings.
Author Bio
