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“Finance Act 2023 amends GST on capital gains, limiting deductions on housing to ₹10 crore. It clarifies tax on Market Linked Debentures and updates on renting residential properties.”

GST ON RENT ON RESIDENTIAL PROPERTY

A residential property can be let out as under-

i) For residential purpose by an unregistered person to an unregistered person.

ii) For residential purpose by a registered person to an unregistered person.

iii) For residential purpose by a registered person to a registered person.

iv) For residential purpose by an unregistered person to a registered person.

v) For commercial purposes.

Let us start first with renting of residential property for ‘Commercial purposes. This is covered under FCM and landlord is liable to pay tax on rent received.

Next to begin with case (i) for residential purpose by an unregistered person to an unregistered person.

That the said transaction is exempted from levy of GST as both the firms is un­registered as per Vide entry no. 12 of table referred in NN 12/2017 CTR as amended by notification 4/2022 CTR dated 28.06.2017. That amended extract is produced as under: –

Sl. No.

Chapter Description of services Rate Conditions
12 Chapter 99 Services by way of renting of residential dwelling for use as residence except where the residential dwelling is rented to a registered person. NIL NIL

Therefore, in the said transaction GST is not leviable.

Case (ii) For residential purpose by a registered person to an  unregistered person.

That the said transaction is also exempt, as per notification no. 4/2022 dated 13.07.2022 taxability is only on the registered recipient, further to this tax on such service is required to be discharged reverse charge mechanism vide notification 13/2017 amended through 05/2022 dated 13.07.2022.

However, in the present case recipient is un-registered person therefore GST is still exempted.

GST on Rent

Case (iii) For residential purpose by a registered person to a registered  person.

That this transaction is taxable, and as per notification 05/2022-CTR dated 13.07.2022, the recipient is required to discharged such liability, However, if such registered recipient is proprietary concern then the same would be exempted from taxation as per NN 15/2022 dated 30.12.2022. That the amended Notification 12/2017 after taking impact of 04/2022 and 15/2022.

Sl. No.

Chapter Description of services Rate Conditions
12 Chapter 99 Services by way of renting of residential dwelling for use as residence except where the residential dwelling is rented to a registered person.

Explanation: -For the purpose of exemption under this entry, this entry shall cover 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.

NIL NIL

Therefore, the recipient will be liable to pay GST under RCM basis.

Case (iv) For residential purpose by an unregistered person to a registered person.

That the said transaction is taxable as the exemption has been withdrawal from such transaction vide notification dated 04/2022 and liable to discharge such liability on RCM basis as per notification 13/2017 amended by 05/2022 dated 13.07.2022. That the relevant portion is reproduced is as follows: –

Sl. No.

Chapter Description of services Rate Conditions
12 Chapter 99 Services by way of renting of residential dwelling for use as
residence
NIL NIL

EXPLANATIONS ON GST ON RESIDENTIAL PROPERTY ON RCM BASIS

Before amendment: 12/2017 CTR dated 28.06.2017 would be read as under:

Sl. No.

Chapter Description of services Rate Conditions
12 Chapter 99 Services by way of renting of residential dwelling for use as
residence
NIL NIL

Therefore, the said transaction is exempted under GST, i.e. from 01.07.2022 to 17.07.2022 residential dwelling for use as residence is not taxed under GST.

After Amendment by notification no. 4/2022 dated 13.07.2022 viz applicable from 18.07.2022, Notification 12/2017 would be read as under: –

Sl. No.

Chapter Description of services Rate Conditions
12 Chapter 99 Services by way of renting of residential dwelling for use as residence except where the residential dwelling is rented to a registered person. NIL NIL

After 18.07.2022 department has withdrawal the exemption when the residential dwelling is given on rent to a “registered person” and also introduce reverse charge mechanism in this regard.

Thereafter, writ application has been filed to Hon’ble DHC in case of Seema Gupta vs UOI (10986/2022 & CM Appl. 32131/2022) for challenging notification 4/2022 CTR dated 28.06.2017, wherein it has been decided that if the residential dwelling is used by RP for its own personal use as residential capacity then the exemption would still available to him.

By considering the above judgement government has added an explanation through NN 15/2022 dated 30.12.2022, therefore in Notification 12/2017 in S. No. 12, in column (3), after the entry, the following explanation shall be inserted, namely would now be read as under: –

Sl. No.

Chapter Description of services Rate Conditions
12 Chapter 99 Services by way of renting of residential dwelling for use as residence except where the residential dwelling is rented to a registered person.

Explanation: -For the purpose of exemption under this entry, this entry shall cover 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.

NIL NIL

Discharge through RCM

Vide notification 05/2022 – Central Tax (Rate) dated 13th July 2022 a new S.No. 5AA has been inserted in Notification 13/2017 -Central Tax (Rate) which is applicable from 18th July 2022. That the newly inserted entry is as follows –

Sl. No.

Category of Supply of Services Supplier of
service
Recipient of
Service
5AA Service by way of renting of residential dwelling to a registered person Any Person Any registered person

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