GST Exemption: Residential Dwelling Renting Explained

Navigating the intricacies of GST exemption for renting residential dwellings can be challenging. This article aims to provide a clarified explanation, focusing on key aspects such as taxation for commercial purposes, reverse charge mechanisms, and recent clarifications by ICAI.

A TRICKY BUT MUST FOCUS GST EXEMPTION

RENTING OF RESIDENTIAL DWELLING FOR USE AS RESIDENCE

Services by way of renting of residential dwelling for use as residence except where the residential dwelling is rented to a registered person are exempt.

Explanation: Services by way of renting of residential dwelling to a registered person where, –

(i) the registered person is proprietor of a proprietorship concern and rents the residential dwelling in his personal capacity for use as his own residence; and

(ii) such renting is on his own account and not that of the proprietorship concern shall be

Note:

Services by way of renting of residential dwelling for use as residence where the residential dwelling is rented to a registered person is liable to GST under reverse charge mechanism.

AFTER THE LATEST INSERTION OF PROVISIONS IN THIS EXEMPTION.. A FLOW OF CONFUSIONS AND BLABBERS COME TO MIND AS TO WHEN SUCH RENTING WOULD BE EXEMPT AND WHEN IT WOULD BE NOT !!

Don’t worry

HERE IS THE SUMMARY REGARDING THE SAME.

1 } The first thing is to fix one thing in mind that renting of residential dwelling FOR COMMERCIAL PURPOSES is ALWAYS TAXABLE UNDER FORWARD CHARGE MECHANISM (which is very very straight forward and clear ).

2 } SECOND, now the purpose left when IT IS USED FOR RESIDENCE PURPOSES.

HERE, now the question is whether it is provided to a registered person or to an unregistered person.

GOING STRAIGHT, If rented to a registered person, It is USUALLY TAXABLE UNDER REVERSE CHARGE MECHANISM and if rented to an unregistered person, It is EXEMPT.

NOW GOING TO THE DEPTH OF THE PROVISION, WHICH HERE IS THE MAIN CRUX OF THIS ARTICLE.

AS TOLD ABOVE, THIS IS TAXABLE WHEN RENTED TO A REGISTERED PROVISION BUT AS PER LATEST EXPANATIONS BY ICAI…. IF THE REGISTERED PERSON SATISFIES THE FOLLOWING CONDITIONS THEN IN THAT CASE RENTING TO A REGISTERED PERSON CAN BE EXEMPT:

**Such registered person is a PROPRIETOR

**Such registered person uses that property for HIS OWN RESIDENCE and IN HIS PERSONAL CAPACITY

**Such renting is done on his own account

HERE IN THE THIRD POINT, THE POINT TO BE NOTED IS “ACCOUNT “.. If the renting is done on proprietary account then it would be chargeable to tax as usual.