GST on Rent

 

Rent services are categories in two part A. Commercial Property B. Residential Property. 

A.  Commercial Property: - The services provided through renting or leasing of the commercial property is covered under the entry no 16 of Notification No 11/2017 –Central Tax (Rate) dated 28^th Jun 2017. The related portion of the notification entry is as follows :-

 

16	Heading 9972	(i) Services by the Central Government, State Government, Union territory or local authority to governmental authority or government entity, by way of lease of land.	Nil
		(ii) Supply of land or undivided share of land by way of lease or sub lease where such supply is a part of composite supply of construction of flats, etc. specified in the entry in column (3), against serial number 3, at item [(i), (ia), (ib), (ic), (id), (ie) and (if)]66. Provided that nothing contained in this entry shall apply to an amount charged for such lease and sub-lease in excess of one third of the total amount charged for the said composite supply. Total amount shall have the same meaning for the purpose of this proviso as given in paragraph 2 of this notification.	Nil
		(iii) Real estate services other than (i) and (ii) above.	9

 

 

Hence as per such entry the GST charged @ 18% on forward Charges Basis on the services provided for rent/lease.

 

B. Residential Property :-  The rental or lease services provide for a residential property was Exempted as per the entry no 12 of exemption notification no 12/2017- Central Tax (Rate) dated 28^th Jun 2017. The relevant portion of such notification is as follows :-

12

Heading 9963 or Heading 9972

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

Nil

Nil

 

Further the entry were amended by notification no 04/2022- Central Tax (Rate) dated 13^th July 2022 as follows :-

 

“(b) against serial number 12, in column (3), after the words “as residence”, the words “except where the residential dwelling is rented to a registered person” shall be inserted;”

 

Further clarification was made by the government vide notification no 15/2022-Central Tax (Rate) dated 30^th Dec 2022 as follows :-

(i)          against S. No. 12, in column (3), after the entry, the following explanation shall be inserted, namely: -

 “Explanation. - For the purpose of exemption under this entry, this entry shall cover services by way of renting of residential dwelling to a registered person where,

– (i) the registered person is proprietor of a proprietorship concern and rents the residential dwelling in his personal capacity for use as his own residence; and

(ii) such renting is on his own account and not that of the proprietorship concern.”;

 

With effect from 18^th July 2022 residential dwelling rented to a registered person will covered under RCM. Vide the notification no 05/2022- Central Tax (Rate) dated 13^th July 2022 the below entry inserted in RCM provisions:-

 

1	2	3	4
5AA	Services by way of renting of residential dwelling to a register person.	Any Person	Any Register Person

Question No 1 :- Whether services supplied by director of a company in his personal capacity such as renting of immovable property to the company or body corporate are subject to Reverse Charge mechanism ?

 

Ans:- Vide circular no 201/13/2023-GST dated 01^st Aug 2023 the government of India clarify the issue vide point no 2.2 as follows :-

 

It is hereby clarified that services supplied by a director of a company or body corporate to the company or body corporate in his private or personal capacity such as services supplied by way of renting of immovable property to the company or body corporate are not taxable under RCM. Only those services supplied by director of company or body corporate, which are supplied by him as or in the capacity of director of that company or body corporate shall be taxable under RCM in the hands of the company or body corporate under notification No. 13/2017-CTR (Sl. No. 6) dated 28.06.2017.

The following table summarizes the gist of GST applicability on renting of both residential and commercial property –

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Following Table Summarize the gist of GST applicability on renting of residential property :-

 

Particulars	Status of landlord	Status of tenant	GST applicability
GST applicability on renting of residential dwelling for the period 1st July 2017 till 17th July 2022
Renting of residential dwelling for use as a residence	Registered/ unregistered	Registered/ unregistered	Exempt in terms of notification no. 12/2017- Central Tax (Rate) dated 28th June 2017.
GST applicability on renting of residential dwelling for the period from 18th July 2022
Renting of residential dwelling for use as a residence	Registered	Registered	Taxable in terms of notification no. 04/2022- Central Tax (Rate) dated 13th July 2022. However, GST is payable by the tenant under the reverse charge mechanism in terms of notification no. 05/2022- Central Tax (Rate) dated 13th July 2022.
Renting of residential dwelling for use as a residence	Unregistered	Registered	Taxable in terms of notification no. 04/2022- Central Tax (Rate) dated 13th July 2022.  However, GST is payable by the tenant under the reverse charge mechanism in terms of notification no. 05/2022- Central Tax (Rate) dated 13th July 2022.
Renting of residential dwelling for use as a residence	Registered	Unregistered	Exempt in terms of notification no. 12/2017- Central Tax (Rate) dated 28th June 2017.
Renting of residential dwelling for use other than residence	Registered	Registered /Unregistered	Taxable as exemption notification doesn’t apply.