FAQs on GST Applicability of RCM on Renting of Residential Dwelling

The renting of a residential dwelling for use as residence is exempt from the levy of GST vide S. No. 12 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017. Now, in the 47th GST Council meeting, it was decided to introduce RCM on renting residential dwellings.

The CBIC vide Notification No. 4/2022 Central Tax (Rate) Dt. 13.07.2022, the above exemption under S.No. 12 of Notification 12/2017 Central Tax (Rate) Dt. 28.06.2017 has been amended.

Now, the exemption reads as under:

Due to such an amendment, GST becomes applicable when a residential dwelling is rented to a registered person under RCM.

The CBIC vide Notification No. 05/2022 – Central Tax (Rate) Dt. 13.07.2022 has inserted a new S. No. 5AA in Notification No. 13/2017 Central Tax (Rate) Dt. 28.06.2017 (This Notification contains services on which RCM is applicable) which is applicable from 18th July 2022.

The newly inserted S.No. reads as under: 

Now onwards landlords who have rented their residential house property to a registered person (Registered under GST) are liable to pay GST under Reverse Charge Mechanism by the Tenant.

This new amendment has brought various confusion and questions to taxpayer mind. For better understanding and to clarify the doubts, we are covering multiple questions which are stated below.

Ques 1: A company (registered in GST) takes a residential house property for use of residence on rent for employees. Is GST payable on such a transaction? If yes, then it is eligible to take ITC?

Ans: Company is required to pay GST @ 18% under RCM. Further, the such expense will be considered as an item of business expenditure and eligible to claim Input Tax Credit by the company.

Ques 2: A company (registered in GST) takes a residential property on rent for one of its directors for residential purposes. Is GST payable on such a transaction? If yes, then it is eligible to take ITC?

Ans: The company is required to pay GST @ 18% under RCM as per N.No.05/2022-Central Tax (Rate) dt. 13.07.2022. Further, the such expense will be considered as an item of business expenditure and eligible to claim Input Tax Credit by the company.

Ques 3: Instead of the Company, if the Director (who is unregistered) himself takes on rent the residential flat then will GST be payable?

Ans: This activity would be exempted from GST and neither the owner of the house nor the Director will be liable to pay any GST as per Notification No.12/2017-Central Tax (Rate) dated. 28.06.2017.

Ques 4: A Company registered under GST, rents out a residential property to an unregistered person. Who is required to pay GST?

Ans: The rent will be exempt in the hands of the Company as well as in the hands of an unregistered person and will be covered by the exemption notification No.12/2017-Central Tax (Rate) dated. 28.06.2017.

Ques 5: An unregistered person (Unregistered under GST) has given a residential house property to an unregistered person (Unregistered under GST) for use for residential purposes. In such circumstances who will pay GST?

Ans: In the current case, the tenant is not liable to pay GST as it is exempted as per Notification No.12/2017-Central Tax (Rate) dated. 28.06.2017.

Ques 6: When a person is having GST registration under the Composition Scheme and takes a residential house property for the purpose of residence on rent then who is required to pay GST and whether ITC can be claimed?

Ans: A registered person is required to pay GST under RCM. It will be considered an item of business expenditure and still not eligible to claim the input tax credit as per Section 10(4) by a composition dealer.

Ques 7: When an individual who is registered taxpayer under GST as a proprietary concern, takes a residential house property for the purpose of residence on rent for him and his family then who is required to pay GST, and whether ITC can be claimed?

Ans: Individual is required to pay GST under RCM @ 18%. It will be considered an item of personal expenditure and not the business expenditure of a proprietary concern. Hence, the ITC of the GST tax paid under RCM can’t be claimed as it is blocked as per Section 17(1) of the CGST Act, 2017.

Ques 8: A Company rents out a residential property to a Firm that is registered under GST. In the current case, GST will be payable by whom and whether they can claim the benefit of ITC?

Ans: In such a case, the GST on rent will be payable by the recipient i.e. the firm under RCM. In this case, even if the company, or owner of the property is registered under GST, only the recipient of service is liable to pay GST under RCM. It will be considered as an item of business expenditure and the firm will be eligible to take the benefit of an input tax credit.

Ques 9: If the taxpayer is located in a State different from the State in which the rented Residential property then what will be the Place of Supply?

Ans: Place of supply shall be the place of residential property. Thus, it is an inter-state supply and IGST will be applicable.

Ques 10: Mr. ABC is having 3 residential Flats and he unregistered person (Under GST) he has given a second Flat to Mr. XYZ (Tenant). Mr. XYZ is doing departmental stores business and is having GST registrations (under Composition Dealer). Now, who will be liable to pay GST, and whether they can claim ITC?

Ans: In such case, Mr. XYZ is liable to pay GST under RCM on the 2nd flat used for residential purposes. Further, he is not eligible to claim ITC.

Ques 11: A person registered (landlord) in GST rents out commercial property to another registered person (registered in GST). Who will pay GST?

Ans: In the current case, GST is applicable to be paid in forwarding charge i.e. landlord is required to collect tax from the registered person (tenant) and pay to the government. A registered person in such a case can avail of ITC.

Ques 12: A person registered in GST provides the service of renting of residential dwelling where commercial activities are done by Mr. B (registered person in GST). Who will pay GST?

Ans: In this case, the recipient Mr. B shall pay GST @ 18% under RCM and may claim ITC on the same.

Ques 13: A person registered in GST provides the service of renting of residential dwelling where commercial activities are done by a Mr. B (unregistered person in GST). Who will pay GST?

Ans: In this case, the company shall charge GST on the forwarding charges and pay the GST amount to the government.

Ques 14: A person unregistered in GST provides the service of renting of residential dwelling where commercial activities are done by a Mr. B (unregistered person in GST). Who will pay GST?

Ans: In this case, no GST is to be paid by the company or by Mr. B.

Ques 15: A person unregistered in GST provides the service of renting of residential dwelling where commercial activities are done by a Mr. B (registered person in GST). Who will pay GST?

Ans: In this case, the recipient Mr. B shall pay GST @ 18% under RCM and may claim ITC on the same.

In case of any query/doubt on the implementation of GST applicability of RCM on Renting of Residential Dwelling or any other query related to GST, please feel free to contact the ASC Group.

Also Read: GST Impact on Rental Income of a Residential House Property

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Mayank Chandra

My employer( a PSU) for the purpose of lease accommodation is demanding an undertaking that I shall be liable for 18% GST via RCM and it may be recoverable from my salary. Is it rightful?

ASC Group

Mayank our team contact you...

Ravi Kumar

I want to know more about ITR form 2, please provide me some information...

ASC Group

Sure Sir

Mukund Narayan Thakur

Thanks for providing of this type of knowledge.

ASC Group

Thanks Mukund

R. Viswanathan

Very Good

R. Viswanathan

Very Good