GST position on residential property let out to registered person

[Notification No. 04/2022-CT (Rate) dated 13.07.2022 and Notification No. 05/2022-CT (Rate) dated 13.07.2022, both w.e.f. 18.07.2022]

Prior to amendment w.e.f. 18.07.2022, if a person has given his residential property to any person for residential purpose (other than Commercial Purpose) is exempted from GST. 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. The said exemption was given in Sr. No. 12 in the aforesaid Notification as under-

But if residential property has been given on rent for ‘Commercial Purposes’ than it was not an exempt supply and service is covered under ‘Forward Charge’ basis i.e. supplier has to charge GST on forward charge basis.

Now, as per Notification No. 04/2022-CT (Rate) dated 13.07.2022 (w.e.f. 18.07.2022) the aforesaid exemption given by Sl. No. 12 of Notification No. 12/2017-CT (Rate) dated 28.06.2017 has been restricted. By the Notification No. 04/2022-CT (Rate) dated 13.07.2022, the following amendment has been made in Notification No. 12/2017-CT (Rate) dated 28.06.2017 as under-

“against serial number 12, in column (3), after the words “as residence”, the words “except where the residential dwelling is rented to a registered person” shall be inserted;

Now by the aforesaid amendment, full exemption may be read as under-

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

It means if residential property is given to a registered person, then GST shall be payable. If residential property is given to an unregistered person (i.e. not to a 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.

Please also 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: –

Before the Notification No. 05/2022-CT (Rate) dated 13.07.2022, 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. Notification No. 05/2022-CT (Rate) dated 13.07.2022 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.

In nutshell as per my understanding:

1. If residential 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 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 property is given to a ‘Registered Person’ for any purpose whether residential or commercial, GST shall be payable under “RCM basis” by way of Notification No. 05/2022-CT (Rate) dated 13.07.2022

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