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As per sub-section (1) of section 11 of Central Goods and Services Tax Act, 2017, the services by way of renting of residential dwelling for use as residence (under Heading 9963 or Heading 9972) were exempt under GST.

With Effect From 18.7.2022.

The Central Government has issued a Notification (04/2022- Central Tax (Rate) dated 13.7.2022, amending the Notification 12/2017 dated 28.6.2017, against “Serial number 12 in column (3)” after the words “as residence”, the words, “except where the residential dwelling is rented to registered person” shall be inserted.

Sr. No HSN/SAC Description of Services Rate Conditions
12 Heading 9963 or Heading 9972 Services by way of renting of residential dwelling for use as residence except where the residential dwelling is rented to registered person Nil Nil

Further, Notification 05/2022-Central Tax (Rate) dated 13.7.2022, states that the services by way renting of residential dwelling for use as residence to be covered under Reverse Charge Mechanism (RCM) at the rate of 18% under entry 5AA.

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 RCM in the hands of the GST Registered person who is the recipient of such services.”

SI No. Category of Supply of Service Supplier of services Recipient of services
5AA Services by way of renting of residential dwelling to a registered person Any person Any registered person

The below tables clearly show analysis of the above notification:

Scenario-1:

When residential property is rented out for Residential purpose by Registered supplier
Applicability To unregistered recipient To registered recipient
Taxability     Exempt under GST Upto 17.07.2022 W.e.f. from 18.07.2022
Exempt under GST GST @ 18% under RCM
ITC NA NA ITC may be denied by the department considering such supplies are used for personal consumption of employees under section 17(5) of CGST Act, 2017
Notification No Notification 12/2017 dated 28.6.2017 Notification 12/2017 dated 28.6.2017

Notification (04/2022- Central Tax (Rate) dated 13.7.2022

NN-05/2022

Scenario-2:

When residential property is rented out for Residential purpose by Unregistered supplier
Applicability To unregistered recipient To registered recipient
Taxability NA Upto 17.07.2022 W.e.f. from 18.07.2022
Exempt under GST GST @ 18% under RCM
ITC NA NA ITC may be denied by the department considering such supplies are used for personal consumption of employees under section 17(5) of CGST Act, 2017
Notification No NA Notification 12/2017 dated 28.6.2017

Notification (04/2022- Central Tax (Rate) dated 13.7.2022

NN-05/2022

Scenario-3:

When residential property is rented out for Commercial purpose by Registered supplier
Applicability To unregistered recipient To registered recipient
Taxability Forward charge @ 18% Upto 17.07.2022 W.e.f. from 18.07.2022
Forward charge @ 18% GST @ 18% under RCM
ITC ITC can be claimed ITC can be claimed ITC can be claimed by recipient
Notification No Notification 12/2017 dated 28.6.2017 Notification 12/2017 dated 28.6.2017

Notification (04/2022- Central Tax (Rate) dated 13.7.2022

NN-05/2022

Scenario-4:

When residential property is rented out for Commercial purpose by Unregistered supplier
Applicability To unregistered recipient To registered recipient
Taxability NA Upto 17.07.2022 W.e.f. from 18.07.2022
NA GST @ 18% under RCM
ITC NA NA ITC can be claimed by recipient
Notification No NA NA

Notification (04/2022- Central Tax (Rate) dated 13.7.2022

NN-05/2022

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