RCM applicability on Residential dwelling under GST*****

Clipped from: https://taxguru.in/goods-and-service-tax/rcm-applicability-residential-dwelling-gst.html

As per Notification No. 05/2022- Central Tax (Rate) Dated: 13th July, 2022 issued by GST council which has came into effect from 18th July, 2022, the transaction of renting of residential or commercial dwelling will be taxable as follows:

For better understanding we taken following below examples:

Transaction 1:

There are two parties, Mr. A and ABC Co.

  • A. having residential property, and he is not registered under GST.
  • Let out residential property to ABC Co. for commercial use. (ABC Co. is registered under GST)
  • Here ABC Co. will pay RCM* on the amount of payment of Rent made by it to Mr. A and avail the ITC for the same.

Transaction 2:

There are two parties, Mr. A and ABC Co.

  • A. having residential property, is registered under GST .
  • Let out residential property to ABC Co. for commercial use. (ABC Co. is registered under GST)
  • Here Mr. A will raise invoice and charge GST on it and hence here forward charge mechanism (FCM) will apply. RCM will not come as Mr. A is registered under GST.

Transaction 3:

There are two parties, Mr. A and ABC Co.

  • A. having commercial property, and he his not registered under GST .
  • Let out commercial property to ABC Co. for commercial use. (ABC Co. is registered under GST)
  • Here the said transaction is not cover under RCM, hence no RCM and FCM** will arise.

Transaction 4:

There are two parties, Mr. A and ABC Co.

  • A. having commercial property, and is registered under GST .
  • Let out commercial property to ABC Co. for purpose of business. (ABC Co. is registered under GST)
  • Here Mr. A will raise invoice and charge GST on it and hence here forward charge mechanism (FCM) will apply.
  • RCM will not come as Mr. A is registered under GST.

48th Meeting of the GST Council 17th December, 2022:

Clarification for residential dwelling is rented to a registered person:

No GST is payable where the residential dwelling is rented to a registered person if it is rented it in his/her personal capacity for use as his/her own residence and on his own account and not on account of his business.

Transaction 5:

There are two parties, Mr. A and Mr. B

  • A. having residential property. (Mr. A registered under GST)
  • Let out residential property to Mr. B for purpose of residential use. (Mr. B registered under GST)
  • Residential dwelling let out for residential purpose, hence no FCM and RCM will arise, as the said transaction is exempt from GST.

From the above transactions as example it is conclude that:

  • Renting of residential dwelling for residential purpose exempt from GST even if both the persons are registered under GST. (Transaction 5)
  • Renting of residential dwelling for commercial purpose will attract RCM. (Transaction 1)
  • Renting of residential dwelling for commercial purpose and if supplier is registered, FCM will applicable. (Transaction 2)
  • Renting of commercial dwelling for commercial purpose, supplier not registered under GST, RCM is not applicable as transaction is not covered. (Transaction 3)
  • Renting of commercial dwelling for commercial purpose, supplier is registered under GST, FCM will be applicable. (Transaction 4)

*RCM= Reverse Charge Mechanism

** FCM= Forward Charge Mechanism

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Disclaimer: This article sets forth our views based on the completeness and accuracy of the facts stated and any assumptions that were included. We disclaim any kind of liability whatsoever regarding the article stated above. Our views are not binding on any authority or Court, and hence, no assurance is given that a position contrary to the article expressed herein will not be asserted by any authority and/or sustained by any tax authority or appellate authority or a Court of law.

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