GST ON RENTING OF RESIDENTIAL PROPERTY

 The 47^th GST Council meeting has brought numerous changes in the rate of GST, Introduced GST on certain food items, removed certain exemptions, etc. Of which, introducing the GST on residential house property is the one.

Renting of any immovable property being residential house property was exempt till 17^th July 2022. A specific exemption was given to renting of residential house property vide Notification No. 12/2017-Central Tax (Rate) dated 28^th June 2017. The exemption notification reads as below.

 “Services by way of renting of residential dwelling for use as a residence”.

However, the said notification is modified to bring the renting of residential property into tax purview. Now, GST will be applicable if the residential property is given for rental to any registered person with effect from 18^th July 2022 as per Notification No. 04/2022-Central Tax (Rate) dated 13^th July 2022. GST at the rate of 18% has to be discharged by the recipient of the service being a tenant on RCM basis as per the Notification No. 05/2022-Central Tax (Rate) dated 13^th July 2022. Now the exemption notification reads as below.

“Services by way of renting of residential dwelling for use as a residence except where the residential dwelling is rented to a registered person”.

The Implications of these amendments are explained below.

1)    Renting of Residential property to registered person where the service provider (lessor) is registered under GST

GST has to be discharged by the recipient of service (Tenant) on RCM basis. The tenant can claim the ITC on GST paid on RCM basis. The service provider (Lessor) has to declare such supplies in his GSTR1 under B2B supplies attracting RCM. The Lessor cannot claim the GST ITC as the tax is paid on RCM basis.

 

2)    Renting of Residential property to an unregistered person where the service provider (lessor) is registered under GST.

The transaction is exempt from the levy of GST. However, the Service provider has to declare such supplies in his GSTR1 under ‘supplies exempted from the levy of GST’.

 

3)    Renting of Residential property to a registered person where the service provider (lessor) is not registered under GST.

GST has to be discharged by the recipient of service (Tenant) on RCM basis. The tenant can claim the ITC on GST paid on RCM basis.

 

4)    Renting of Residential property to a registered person where the service receiver (Tenant) is a Composition dealer.

GST has to be discharged by the recipient of service (Tenant) on RCM basis. However, a Composition dealer cannot claim the GST paid on an RCM basis as ITC.

 

THE IMPLICATIONS OF GST ON RESIDENTIAL PROPERTY ARE SUMMARISED IN THE TABLE BELOW.

SCENARIOS	SERVICE PROVIDER (LESSOR)	SERVICE RECIPIENT (TENANT)	GST APPLICABILITY
1	Registered	Registered	GST has to be discharged by the recipient of service (Tenant) on RCM basis.
2	Registered	Unregistered	GST is not applicable since the service recipient is unregistered.
3	Unregistered	Registered	GST has to be discharged by the recipient of service (Tenant) on RCM basis.
4	Unregistered	Unregistered	GST is not applicable since the service recipient is unregistered.

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CA Ramakrishna Sanjay