We all know that effective from 18.07.2022 RCM has been introduced on rental service in respect of residential house property meaning thereby that if such rental service is provided to a registered tenant then that tenant is required to pay RCM on such rental. The RCM liability on registered tenant shall apply irrespective of whether the landlord is registered under GST or not.
Now let us see the implications of RCM introduction vis a vis the liability to get registered under GST from the landlord's point of view.
Let's take a situation where the landlord of the residential property is exclusively engaged in the supply of rental services in respect of residential properties only and aggregate turnover from all such rental services during the year exceeds the threshold limit of Rs 20 Lakhs in case of services.
Now if in this case tenant is registered than RCM will apply and accordingly the landlord is not required to take registration under GST. The reason being that notification no 05/2017 exempts all such persons from registration in GST who are engaged exclusively in supplies of goods and services which are subject to RCM payable by the recipient. Therefore as long as the landlord is exclusively supplying the rental service from residential house property which is subject to RCM if tenant is registered than no liability to register under GST will occur.
Where tenant is unregistered person, then no RCM will apply, in that case whether the landlord is required to take registration if aggregate turnover from rental services exceed Rs 20 lakhs? Well in that case the landlord is exempted under section 23(1)(a) read with notification no 12/2017 CT Rate provided he is engaged exclusively in the supply of wholly exempt goods and services only. It may be noted here that rental service of residential property continues to be exempt in the hands of the landlord in terms of entry number 12 of notification no 12/2017 CT rate. And therefore even if such rental exceeds the threshold limit of Rs. 20 Lakh no registration is required in terms of combined reading of section 23(1)(a) and notification no 12/2017 CT rate.
But if the landlord has some commercial property as well and that is rented too, then the benefit of this section will not be available and accordingly registration under GST will be required on crossing the threshold limit.
Another important aspect, if someone has commercial properties located in more than one state, whether he is required to take up the registration in each of those states? The answer is no, since place of supply does not determine the liability to register. One has to get himself registered under GST on crossing the prescribed threshold limit in every such state from where he makes taxable supply of goods and services. So even if commercial properties are located in different states and the landlord crosses the threshold, he need not register himself in each of those states. He can continue to supply from his origin state and get registered in the origin state itself that is the state of his residence for the simple reason that he does not have any place of business or fixed establishment in any of those states.
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