GST on service of renting of residential dwelling w.e.f. 18-07-2022 Read more at: https://taxguru.in/goods-and-service-tax/gst-service-renting-residential-dwelling-w-e-f-18-0, Goods and Services Tax - GST

[Bharat Cholleti]

Dear sir,

As per NNo.5/2022 CTR, A new service has been added 5AA in NNo.13/2017 " service by way of renting of residential dwelling to a registered person". my under standing is if a registered person receive the service of residential portion or house on rent is liable to pay tax@18% under Reverse charge. Is it correct. As a department how do they know these persons have taken residence ? As a registered person I have taken a shop which is a residential property and running the shop/offices do they liable to pay GST@18% from 18-7-2022. kindly clarify. Thx in advance.

Posts / Replies

[Ganeshan Kalyani]

Sir, a registered person taking a residential dwelling on rental basis has to pay GST on RCM. This means the service provider is an unregistered person. Suppose service provider is a registered person then he would himself charge GST on invoice raised by him and pay GST i.e. forward charge.

[Amit Agrawal]

With due respect and in my humble view, 'where the residential dwelling is rented to a registered person', liability to pay GST is on 'recipient' under RCM, IRRESPECTIVE of the fact that service provider / supplier is also a registered person.

These are strictly personal views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

About the query raised by the querist, it is not clear to me how 'shop' is a residential dwelling / property.

[SHARAD ANADA]

Notification 05/2022 CTR is issued In exercise of the powers conferred by sub-section (3) of section 9 of the Central Goods and Services Tax Act, 2017. Section 9(3) reproduced here under;

(3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

So here it covers supply of "SPECIFIED CATEGORIES" of supplies whetere it is supplied by registered or unregistered. As per section 9(3) even If supply made by the registered supplier and it is of a specified category in that case also recipient is liable to pay GST on RCM basis.

This notification is not issued under section 9 (4) of CGST Act. Section 9(4) covers RCM on SPECIFIED CATEGORIES of supply by unregistered person.

Second as per notification 05/2022 CTR entry 5AA specified only Residential dewalling and does not speaks about the use of residential dewalling i.e. residential dewalling may be used for residential purpose or commercial purpose.

As per notification 12/2017 CTR Services by way of renting of residential dwelling for use as residence is exempt supply. So if residential dewalling is given on rent for commercial purposes than it is not exempt supply and service is covered under forward charge basis i.e.supplier has to charge GST on forward charge basis (if AATO of supplier is more than 20 lakh)

Before notification 05/2022 CTR, For e.g bank is running it's business residential dewalling in that case use of residential dewalling is for commercial purpose and supplier is liable to pay GST on forward charge basis. Now after notification 05/2022 even if supplier is registered person GST is payable on rcm basis. Here one has to look the RESIDENTIAL DEWALLING and not the purpose for which it is used i.e. for residential purpose/ commercial purpose.

As per notification 05/2022 CTR if supplier is ANY PERSON, GST is payable by ANY registered person.

As per section 24(iii) Person who is required to pay tax under RCM is required to register compulsorily.

Now question is person who is recipient of renting of residential dewalling service (for residential purpose/ commercial purpose) is he liable for compulsory registration?

[Amit Agrawal]

I am of the view that Section 24 (iii) does NOT force any unregistered person - who is not liable to take registration either u/s 22 or due to Section 23 - to take GST registration merely because it is recipient of 'Renting of Residential Dwelling Services' from 'any person located in the taxable territory'.

Reason behind my views can be seen in very lengthy discussion we had under Issue ID 117679 bearing subject-line as 'RCM provisions on RWA (Residents Welfare Association)'.

I believe that very same reason applies for situation being discussed here.

These are strictly personal views of mine and the same should not be construed as professional advice / suggestion.

[Bharat Cholleti]

Sir,

Some of the shops attached to a residential property or office premises will be in residential property such persons are not liable to pay Gst?only taking residential dwelling is only taxable under RCM by regd person.

[Amit Agrawal]

I wish to draw attention to recently amended exemption entry No. 12 from Notification No. 12/2017- Central Tax (Rate) as amended till date.

Exemption is for 'Services by way of renting of residential dwelling for use as residence', with an exception 'where the residential dwelling is rented to a registered person'. The word 'The' is for 'residential dwelling given on rent for use as residence' in my view.

So, when any residential dwelling is given on rent for use as 'Shop / Offices' etc., exemption from GST continues to be NOT available even if recipient is an unregistered person (either u/s 22 or due to Section 23). And in case a case of unregistered recipient, liability to pay GST will continue to be on the supplier on the forward charge basis (i.e. when either supplier is registered or liable to be registered).

Now, I want to draw attention to recently added entry at 5AA of Notification No. 13/2017- Central Tax (Rate) as amended till date.

If any residential dwelling is given on rent IRRESPECTIVE OF USE (i.e. EITHER for use as residence OR for use as 'Shop / Offices' etc.) AND if recipient is registered under GST, then, liability to pay GST will be on such recipient registered person under RCM. In this case, supplier can NOT charge GST against renting of residential dwelling (for use is as 'Shop / Office' etc.) under forward charge EVEN IF he is registered.

These are strictly personal views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

Needless to say, Services by way of renting of Shop / Office spaces per se (i.e. premises not meant / made as 'residential dwellings') are not covered 'either under exemption-entry or under RCM entry, which are part of these discussions'.

And such services by way of renting of Shop / Office spaces continues to be taxable / non-exempted and under forward charge basis (unless supplier is located in a non-taxable territory).

These are strictly personal views of mine and the same should not be construed as professional advice / suggestion.

[VASANTH KUMAR]

Dear sir,

Going by the intention or object of insertion of entry 5AA under RCM, the recommendations of 47th GST Council Meeting, under category C4, sl.no.2 where it is mentioned that "Exemption on the follwoing services is being withdrawn", clause (f) mention as "renting of residential dwelling to business entities (registered person)". With this it is understood that, there was exemption available if residential dwelling is rented to the registered person for use as residence and no exemption when residential dwelling rented for commercial purpose.

In order to give an effect to this the exemption entry sl.no.12 of 12/2017 got amended as "services by way of renting of residential dwelling for use as residence except where the residential dwelling is rented to a registered person.

In nutshell, (i) renting of residential dwelling to a registered person for use as residence taxable under RCM i.e., registered person (recipient) is liable to pay tax; (ii) Renting of residential dwelling to un-registred person exempt; and (ii) Renting of residential dwelling for commercial purpose taxable in the hands of supplier under FC irrespective whether recipient is registered or not.

[VASANTH KUMAR]

Dear sir,

with due respect i would like to differ amitsir view i.e., "If any residential dwelling is given on rent IRRESPECTIVE OF USE (i.e. EITHER for use as residence OR for use as 'Shop / Offices' etc.) AND if recipient is registered under GST, then, liability to pay GST will be on such recipient registered person under RCM. In this case, supplier can NOT charge GST against renting of residential dwelling (for use is as 'Shop / Office' etc.) under forward charge EVEN IF he is registered", based on reasoning given in my earlier reply.

[Amit Agrawal]

Dear Shri Vasanth Kumar Ji,

With total respect for your views, kindly now allow me to elaborate why I cannot agree with them:

A. You have quoted one of recommendations of 47th GST council meeting which is about withdrawal of exemption (i.e. "renting of residential dwelling to business entities (registered person)").

A1. But, what is worth nothing is that above-said recommendation does NOT throw any light what is made 'taxable under RCM basis u/s 9 (3)' and what is object / intention behind insertion of entry 5AA. Anyway, 'wordings used by GST council while recommending' does not override 'unambiguous & clear meaning of wordings used in the official notifications'.

B. Then, you have quoted changes made in exemption at entry No. 12 to give effect the above-said recommendations of 47th GST council meeting.

B1. But again, this amendment does NOT deal with what is made 'taxable under RCM basis u/s 9 (3)'.

C. Very surprisingly, you completely ignored what is made 'taxable under RCM u/s 9 (3)' vide Notification No. 05/2022-Central Tax (Rate) by inserting Serial No. 5AA in Notification No. 13/2017- Central Tax (Rate).

C1. Again with total respect to your views, I strongly feel that one cannot arrive at conclusions about what is covered 'taxable under RCM basis u/s 9 (3)' and what is not, without even referring to wordings used in Notification No. 13/2017- Central Tax (Rate).

C2. And said entry Serial No. 5AA reads as under: 'Service by way of renting of residential dwelling to a registered person.'

C3. This entry does NOT differentiate 'residential dwelling' depending upon use (i.e. for use residence and for use for commercial purpose say as shop or office), where exemption entry specifically deals with ONLY 'residential dwelling for use as residence'.

C4. Moreover, there is no connection between two notifications issued for two difference purposes (one specifying what is exempted and other specifying what 'taxable under RCM basis u/s 9 (3)'). And you have also not provided any legal basis what-so-ever to connect these two different types of notifications to arrive at your views.

In nutshell and in all humility, I stand with my views shared earlier.

These are strictly personal views of mine and the same should not be construed as professional advice / suggestion. I respect contrary views.

[Shilpi Jain]

The moment a residential dwelling is rented to a registered person, liability under rcm is attracted.

The end use of such dwelling I e. Whether as residence or for commercial use, and the status of the service provider i.e. whether registered or otherwise, are all not relevant

[VASANTH KUMAR]

Dear sir / madam

can anybody throw light on the issue whether notification can be issued under RCM without there being a discussion taking place at GST Council Meeting on the particular issue .

as per my knowledge and reading the 47th GST Council Meeting Recommendations, with respect to renting of residential dwelling used as residence by registered person (recipient) which was withdrawn from exemption (refer C4, 2(f)) but there was no discussion on renting of residential dwelling to a regitered person, bringing under RCM

whether notification can be issued in such a situaion or not?

[Amit Agrawal]

Notification No. 05/2022-Central Tax (Rate) dated 13.07.2022 starts as follows: "In exercise of the powers conferred by sub-section (3) of section 9 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby makes the following further amendments ..................."

[Amit Agrawal]

* in above post of mine, please read date of notification as 13.07.2022 (& not 05.07.2022)

[Amit Agrawal]

Press release dated 29.06.2022 by PIB, Ministry of finance with heading as 'Recommendations of 47th GST Council Meeting' have following 'note' at the end:

"Note: The recommendations of the GST Council have been presented in this release containing major item of decisions in simple language for information of all stakeholders. The same would be given effect through relevant Circulars/ Notifications/ Law amendments which alone shall have the force of law."

[Sundararaman Rajaram]

What happens if the recipient is registered in another State but not in the State where he receives residential dwelling services for marketing people ? Should we still pay RCM ? If yes, how to pay. Is registration mandatory?

[Amit Agrawal]

Dear Shri Sundararaman Rajaram Ji,

Such registered recipient (i.e. registered in other state) needs to take another registration in the state where subject property is located and pay taxes under RCM.

For more details along-with my reasons as well as alternate opinion, you may refer to Issue-ID No. 118083 with subject-line as follows: Reverse charge on Residential Dwelling

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

Dear Shri Sundararaman Rajaram Ji,

In continuation with my last post here, you may also have a look at my article published on TMI (Article ID = 10589) bearing subject-line: Multiple registrations all over India on account of singular RCM provision (i.e. renting of residential dwelling Services) and Time to revisit tax compliance strategy:

Link: https://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=10589

In the article, I also tried to cover aspects related to 'distinct person/s as per Explanation – I & II under Section 8 of the IGST Act, 2017' in the context of the subject matter of your query at serial no. 17 above, in my article.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

Changes in RCM provisions (w.r.t. 18.07.2022) are for 'Service by way of renting of residential dwelling to a registered person' irrespective of use (i.e. residential / non-residential).

But, Section 14 have no role to play solely because subject services are brought into RCM w.e.f. 18.07.2022. However, section 14 will definitely come into play (i.e. even for determining liability under RCM) where there is change of rate of tax (i.e. the situation where exemption was withdrawn - 'services by way of renting of residential dwelling for use as residence')

Furthermore, Section 14 (b) deals with case/es where the goods or services or both have been supplied after the change in rate of tax while 'the time of supply' u/s 13 is for liability / payment of gst.

In the context under discussion, one also needs to take note of Section 31 (5) which deals with raising tax-invoice in case of continuous supply of services.

Now, if there is clear agreement between tenant / landlord for lease / rental for 11 months or so and the material date - 18.07.2022 - falls some-where in-between that agreement and if rent is supposed to be paid by 10th of start of the month (which is general practice), then, following issues are worth consideration:

1. When services are supplied? At start of execution of agreement or continuously everyday over period of 11 months (i.e. period of lease / rental agreement) or at start of every month for that month.

2. If services are continuously supplied for everyday for 11 months (i.e. period of lease / rental agreement), what happens when supplier does not raise invoice till 17.07.2022 despite due date of paying rent for entire month of July, 2022 was 10.07.2022 and rent was also received on 10.07.2022 and ignoring the requirement of Section 31 (5).

3. Generally, such agreement does not either have pre-mature termination clause or have period of notice for early termination is pre-decided therein. And it is presumed that we are dealing with a situation where such event is not under consideration.

Main question/s - in the context under discussion here - is whether Section 14 (b) will come into play in above scenario just because landlord failed to raise invoice on or before 17.07.2022.

As there are multiple legal issues are involved here and some of them are dependent upon nature / contents of agreement between landlord and tenant, I was guarded in my response in my post at serial number 1 above.

Hence and in summary, I stand by what I said earlier in my post at serial number 1 above.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

Please ignore my last post at serial number 20 above. It was meant for issue-id - 118124 with subject-line as 'residential dwelling RCM'.

My apology for the inconvenience!