1. Till 17.07.2022 the services by way of renting of residential dwelling for use as a residence were unconditionally exempted from GST vide Sr. No. 12 of Notification No. 12/2017-CT (Rate). However, from 18.07.2022 the said services became taxable if the same were supplied to a registered person and in such a situation the tax was required to be paid by the recipient. Therefore, the ambit of the exemption was considerably reduced and the exemption was available from 18.07.2022 only if the residential dwelling is rented to an unregistered person.
2. An issue, therefore, arose in the case of the proprietor of a business who is registered under GST and who rented a residential dwelling for their own personal use. A strict interpretation of the amendments made w.e.f. 18.07.2022 led to a view that such proprietors shall be liable to pay GST on the rent under the reverse charge mechanism (RCM). However, via our communication dated 18.07.2022, we expressed a view that a proprietor taking a residential dwelling on rent for his own use is not the recipient (since it is not for the purpose of business) and hence shall not be liable to pay the tax under RCM.
3. Now vide Notification No. 15/2022-CT (Rate) dt. 30.12.2022 an Explanation has been added to the said Sr. No. 12 of Notification No. 12/2017-CT (Rate). to the effect that exemption shall be available where the registered person is the proprietor of a proprietorship concern and rents the residential dwelling in his personal capacity for use as his own residence and such renting is on his own account and not that of the proprietorship concern.
4. Therefore, in view of the aforesaid Explanation the registered proprietor shall not be liable to pay GST on the rent incurred in respect of the residential dwelling for their own use. In other words, GST shall be payable if the residential dwelling is rented for use in a proprietorship business (e.g., for use as a guesthouse, etc.)
5. The following observations in respect of the aforementioned Explanation may be noted: