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

[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!