GST applicability on renting services of residential dwelling w.e.f. 18.07.2022:
Analysis of amendments in GST applicability on renting services of residential dwelling w.e.f. 18.07.2022:
As per Entry 12 of Notification 12/2017- Central Tax Rate dated 28.6.2017, “Services by way of renting of residential dwelling for use as residence” is exempt.
However, as per Notification No 05/2022- Central Tax (Rate) dated 13.7.2022, amendment has been made in Notification 13/2017- Central Tax (Rate) dated 13.7.2022 by including the following Entry 5AA under Reverse charge mechanism:
Source: Extract of Notification No 05/2022- Central Tax (Rate) dated 13.7.2022
Therefore, services by way of renting of residential dwelling to a GST registered person for either residential or commercial purpose, shall attract GST and is to be paid under Reverse Charge Mechanism (RCM) in the hands of the GST Registered person who is the recipient of such services. It is irrelevant whether the supplier of rental service of such residential dwelling is registered under GST or not.
For example: In case a company, registered under GST, takes a residential property on rent for one of its directors or employees for residential purposes, then such company has to pay GST @ 18% under RCM and thereafter, may claim ITC on the same.
The following flowchart provides clarity in applicability of GST on services of renting of residential dwelling w.e.f 18.07.2022:
For the sake of further convenience, kindly refer to the following examples for the applicability of GST on services of renting of residential dwelling w.e.f 18.07.2022:
- GST unregistered person provides service of renting of residential dwelling for residential purposes to a GST Registered Here, the GST registered recipient shall pay GST @ 18% under RCM and may claim ITC on the same.
- GST registered person provides service of renting of residential dwelling for residential purposes to a GST Registered Here, the GST registered recipient shall pay GST @ 18% under RCM and may claim ITC on the same.
- GST unregistered person provides service of renting of residential dwelling for commercial purposes to a GST Registered Here, the GST registered recipient shall pay GST @ 18% under RCM and may claim ITC on the same.
- GST registered person provides service of renting of residential dwelling for commercial purposes to a GST Registered Here, the GST registered recipient shall pay GST @ 18% under RCM and may claim ITC on the same.
- GST unregistered person provides service of renting of residential dwelling for residential purpose/Commercial purpose to a GST unregistered Here, no GST shall be applicable on such services.
- GST registered person provides service of renting of residential dwelling for residential purposes to a GST unregistered Here, no GST shall be applicable on such services. This continues to remain exempted.
- GST registered person provides service of renting of residential dwelling for commercial purposes to a GST unregistered Here, the supplier of such service shall collect GST @ 18% from the recipient of service and shall pay GST under Forward Charge Mechanism.
Therefore, kindly note in case such residential dwelling is provided on rent for residential purpose to an unregistered person, then such supply of service is still exempt under GST by virtue of Entry 12 of Notification 12/2017- Central Tax Rate dated 28.6.2017.
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Author Bio
State government taking rent from bank for part of Premises given for ATM , WHETHER GST is payable under RCM.
In case a company, registered under GST, takes a residential/commercial property on rent for one of its directors commercial purposes, then such company has to pay GST @ 18% under RCM and thereafter, may claim ITC on the same.
i have rented residential accomodation in Delhi ncr. My spouce’s propreitorship trading firm is GST registered at the same adress though she nor the firm is part of the agreement.
How does the GST changes have an affect here? Does she/her firm need to pay GST?
We are in hotel & restaurant business. We have taken room on rent for our workers from unregistered person. RCM is not applicable to us being hotel industry. Does rent paid by us to unregistered landlord liable to GST under RCM. Please reply. Thanks and regards
Important aspects missed to discuss for which CBIC should give clarification viz.,
1. Regd. person in one State taken residential unit for guest house in another State where he is not registered. Then how he can he pay CGST&SGST under RCM being an un-regd. person?
2. Alternatively, can he pay IGST under RCM with PoSS is location of property. Then he cannot take ITC being PoSS is in different State.
POS for immovable property is the place where the Imm property is located. However if the provider of service is unregister person, I don’t think POS will come in picture. Hence in case if the service is provided in other state, I think IGST has to be deducted under RCM, then only ITC can be availed.
Moreover the intention of the govt is the shift the burden on service revepient. However in this case as there is no liability of tax on UR person as being not required to register, there is no question of liability on URP and hence only IGST to be deducted in RCM.
https://pib.gov.in/Pressreleaseshare.aspx?PRID=1838020
Please Check this PIB Release, It says GST is Applicable only if an Unregistered person Let out his property to a Registered person for Business Dwelling
Dear Sir, How can we identify whether the property under consideration is Residential or commercial?
An agreement should substantiate it. Even GST officer may ask this question, wherein you need to submit any evidence to show that the property is either Residential or commercial.
If a registered individual pays GST for residential house rent by RCM. Will the ITC not be disallowed us 17(1)
Sir,
Please clarify place of supply in this case