GST on Renting of Residential Property/ Dwelling (Notification No. 05/2022-CT(Rate) dated 13-07-2022)
With effect from 18th July 2022, exemption under GST on the service of renting of residential dwelling for use as residence (SAC 9972) shall be restricted where the recipient of such service is not registered under GST.
Where the recipient of such service is registered under GST, the service shall be liable to GST @18%. However, the tax shall be paid by the recipient under reverse charge.
The Recipient will also be able to claim the ITC of the GST paid under reverse charge as payment of rent will be a business expenditure and the same is not included in the list of blocked ITC u/s 17(5).
The phrase ‘residential dwelling’ has not been defined in the Act. It has therefore to be interpreted in terms of the normal trade parlance as per which it is any residential accommodation (something like permanent), but does not include hotel, motel, inn, guest house, camp – site, lodge, house boat, or like places meant for temporary stay.
Author view’s : However, GST department may disallow ITC due to following reason
1. Section 17(5) (g) : Goods and services used for personal consumption (may be of employees, directors or even others)
2. Guest House expenses not eligible for ITC – Services used for maintaining guest house for temporary accommodation of employees and non-employees is not eligible for ITC, as not in course of business – National Aluminium Co. Ltd., In re [2019] 102 taxmann.com 371 (AAAR – Odisha). This decision was in appeal against decision in National Aluminium Co. Ltd., In re [2018] 98 taxmann.com 245 = 71 GST 1 (AAR – Odisha), where it was held that guest house, transit house, and training hostels is a business requirement and is eligible for ITC, excluding food and beverages, for employees [really food is not for personal consumption of employees, it is part of guest house service as a composite supply].
Conclusion:
1. If residential property is given to an unregistered 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.
2. If residential house/property is given to an unregistered 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 house/property is given to a registered person for any purpose whether residential or commercial, GST shall be payable on RCM basis by way of Notification No. 05/2022-CT (Rate) dated 13.07.2022
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