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Analysis of amendments in GST applicability on renting services of residential dwelling w.e.f. 18th July 2022

Ishan , Last updated: 18 July 2022  
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As per Entry 12 of Notification 12/2017- Central Tax Rate dated 28.6.2017, "Services by way of renting of residential dwelling for use as residence" is exempt.

However, as per Notification No 05/2022- Central Tax (Rate) dated 13.7.2022, amendment has been made in Notification 13/2017- Central Tax (Rate) dated 13.7.2022 by including the following Entry 5AA under Reverse charge mechanism:

Category

Source: Extract of Notification No 05/2022- Central Tax (Rate) dated 13.7.2022

Therefore, services by way of renting of residential dwelling to a GST registered person for either residential or commercial purpose, shall attract GST and is to be paid under Reverse Charge Mechanism (RCM) in the hands of the GST Registered person who is the recipient of such services. It is irrelevant whether the supplier of rental service of such residential dwelling is registered under GST or not.

Analysis of amendments in GST applicability on renting services of residential dwelling w.e.f. 18th July 2022

For example: In case a company, registered under GST, takes a residential property on rent for one of its directors or employees for residential purposes, then such company has to pay GST @ 18% under RCM and thereafter, may claim ITC on the same.

The following flowchart provides clarity in applicability of GST on services of renting of residential dwelling w.e.f 18.07.2022:

Flowchart

For the sake of further convenience, kindly refer to the following examples for the applicability of GST on services of renting of residential dwelling w.e.f 18.07.2022:

  • GST unregistered person provides service of renting of residential dwelling for residential purposes to a GST Registered Here, the GST registered recipient shall pay GST @ 18% under RCM and may claim ITC on the same.
  • GST registered person provides service of renting of residential dwelling for residential purposes to a GST Registered Here, the GST registered recipient shall pay GST @ 18% under RCM and may claim ITC on the same.
  • GST unregistered person provides service of renting of residential dwelling for commercial purposes to a GST Registered Here, the GST registered recipient shall pay GST @ 18% under RCM and may claim ITC on the same.
  • GST registered person provides service of renting of residential dwelling for commercial purposes to a GST Registered Here, the GST registered recipient shall pay GST @ 18% under RCM and may claim ITC on the same.
  • GST unregistered person provides service of renting of residential dwelling for residential purpose/Commercial purpose to a GST unregistered Here, no GST shall be applicable on such services.
  • GST registered person provides service of renting of residential dwelling for residential purposes to a GST unregistered Here, no GST shall be applicable on such services. This continues to remain exempted.
  • GST registered person provides service of renting of residential dwelling for commercial purposes to a GST unregistered Here, the supplier of such service shall collect GST @ 18% from the recipient of service and shall pay GST under Forward Charge Mechanism.
 

Therefore, kindly note in case such residential dwelling is provided on rent for residential purpose to an unregistered person, then such supply of service is still exempt under GST by virtue of Entry 12 of Notification 12/2017- Central Tax Rate dated 28.6.2017.

 

DISCLAIMER: The contents of this article are solely for informational purpose and for the reader’s personal non-commercial use. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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Ishan
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Category GST   Report

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