The 47th GST Council meeting held on 28–29 June 2022 which coincided with the fifth anniversary of GST implementation was a significant meeting discussing various crucial matters including modification to Form GSTR-3B, rate revisions, and withdrawal of exemptions, inversion corrections, and IT-related measures. One such decision taken was to withdraw the exemption in respect to ‘Renting of a residential dwelling to registered business entities.

Following the recommendations by the GST council in the 47th GST Council Meeting, government vide Notification no. 05/2022-Central tax (rate) dated 13th July 2022 made the necessary amendment by inserting clause 5AA as under and this notification shall come into force with effect from 18th July 2022.

(1) (2) (3) (4)
“5AA Service by way of renting of a residential dwelling to a registered person. Any person Any Registered person”

Let’s compare the old situation and the new situation:

Particulars Old Provisions New Provisions w.e.f. 18.07.2022
Rental on Commercial Property (No change in provisions)
GST Applicability Yes Yes
GST Rate 18% 18%
Liability to charge GST on the landlord Yes, if the landlord is liable for registration Yes, if the landlord is liable for registration
Liability on Tenant No No
Rental on Residential Property
GST Applicability No Yes
GST Rate NA 18%
Liability to charge GST on Landlord NA No
Liability on Tenant NA Yes, under Reverse Charge Mechanism (RCM), only if the tenant is a registered person.

Frequent Asked Questions:

Q1: If a salaried person is taking residential property on rent from a registered landlord, will there be the applicability of GST on such transactions?

Ans: GST will not be applicable in such a case. GST is to be deposited only if the recipient is registered under GST Law, irrespective of the fact whether the landlord is registered under GST laws or not.

Q2: If both the supplier and receiver are registered under GST and the residential dwelling is taken on rent, who will be required to deposit the GST?

Ans: Even if both the parties are registered under GST law, the recipient will have to deposit the GST on rental @ 18% directly to the government under Reverse Charge Mechanism. However, the GST paid by the tenant can be claimed through an Input tax credit.

Q3. Suppose a company (registered under GST) has taken a residential flat on rent for its employees and the landlord is a GST unregistered individual, who will be required to deposit the GST?

Ans: In such a case, GST will have to be paid by the corporate entity, which is a tenant. However, if the employee directly takes the flat on rent, then it will outside the ambit of GST.

Q4. If both the supplier and recipient are unregistered, what would be the applicability?

Ans: In such a case, new GST norms would not be applicable.

Q5. If any person is registered under GST as a sole proprietorship concern and takes a residential flat for the purpose of residence on rent for himself/family, what would be the implications under GST?

Ans: This is an example of personal expenditure and not a business expenditure of the proprietorship concern. In such a case, GST will be paid under RCM but the ITC of the GST paid cannot be claimed as it is blocked under section 17(1).

Author – CA Mridul Gupta, MRIDUL GUPTA & CO, Chartered Accountant in Practice from Delhi and can be contacted at [email protected]).

Author Bio

Qualification: CA in Practice
Company: MRIDUL GUPTA & CO.
Location: Delhi, Delhi, India
Member Since: 09 Feb 2019 | Total Posts: 18
Experienced Chartered Accountant with a demonstrated history of working in the financial services industry, skilled in Statutory Audits, Income Tax, GST Compliances, Auditing, Financial Accounting and Financial Reporting. View Full Profile

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3 Comments

  1. Pavan says:

    Hi I am staying in shared apartments from Get set home they applied 12%GST on rent charges on all individual staying in apartment is this a right?
    If so we paying tax at the end of the year who will get benefits.

  2. Ankitha says:

    Hi,

    The notification is effective from 18.07.2022.
    So, Should GST be paid under RCM for the the rent paid on 02.07.22 for July,2022 while filing the GST return?

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