GST on Commercial Rentals – Important GST amendment w.e.f. 10.10.2024
Applicability of Reverse Charge Mechanism (RCM) on Renting of Properties (Non-Residential)
Introduction:
The Government of India has recently issued Notification No. 09/2024 – Central Tax (Rate) on October 8, 2024, further amending Notification No. 13/2017 – Central Tax (Rate) regarding the applicability of GST under the Reverse Charge Mechanism (RCM) for the renting of non-residential properties. This notification introduces a new entry, 5AB, which mandates that services provided by way of renting of any property (other than residential dwellings) to any registered person by an unregistered person will now be covered under the RCM.
This means that the recipient (GST registered person) will be responsible for paying the GST on Renting of any property (other than residential dwellings including commercial establishments, offices, godowns, etc.,) not the service provider (Unregistered Landlord / Owner of the premises).
Kindly note that the tax as paid as RCM can be claimed as an Input tax credit for Regular GST registered persons.
Key Features of Notification No. 09/2024:
- Addition of Entry 5AB:
- The notification inserts serial number 5AB in the table under Notification No. 13/2017.
- It covers “Service by way of renting of any property other than residential dwelling.”
- When such services are provided to any registered person by an unregistered person, the recipient is liable to pay GST under RCM.
- Effective Date:
- The provisions of this notification will come into force from October 10, 2024.
The present position after considering the above notification and earlier notification of Commercial & Residential dwelling
| Property | Supplier | Recipient | GST implications |
| Residential | Registered | Registered | Taxable under RCM |
| Residential | Registered | Unregistered | Exempt, if used as a residence |
| Residential | Unregistered | Registered | Taxable under RCM |
| Residential | Unregistered | Unregistered | No GST Liability |
| Commercial | Registered | Registered | Forward Charge |
| Commercial | Registered | Unregistered | Forward Charge |
| Commercial | Unregistered | Registered | Taxable under RCM |
| Commercial | Unregistered | Unregistered | No GST Liability |
Note to Composition GST Dealers
· Composition dealers, though exempt from charging GST on outward supplies, are liable to pay tax under RCM for the transactions covered under RCM provisions, including the one under this notification.
· However, composition dealers cannot claim input tax credit (ITC) on the GST paid under RCM, which increases their cost of renting non-residential properties from unregistered persons.
· The rate applicable to the supplies is the rate at which GST has to be paid. This means that rate under composition scheme should not be used for reverse charge purposes.
This is applicable from 10th Oct 2024
The relevant notification is provided below
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