RCM ON RESIDENTIAL PROPERTY

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This discussion clarifies the Goods and Services Tax (GST) liability when a residential property is rented out for business purposes. If a GST-registered partnership firm (M/S ABC) rents a residential property from an unregistered owner (Mr. A) and then sublets it to a private limited company (BCD), the partnership firm is liable to pay GST under the Reverse Charge Mechanism (RCM). This is because the renting of residential property to a GST-registered entity for business use attracts GST, payable by the recipient under RCM, regardless of the landlord's GST registration status. Notification No 05/2022- Central Tax (Rate) dated 13.7.2022 provides the reference for this.

Jignesh Savaliya

Jignesh Savaliya (Querist)
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04 December 2022 Mr. A having residential property, not registered under GST let out residential property for Business purpose to M/S ABC (Partnership Firm) registered under GST. Further M/S ABC (Partnership Firm) registered under GST let out this residential property for Business Purpose to BCD (Private Limited Company).

As per my view, in above case M/S ABC (Partnership Firm) is liable to pay GST under RCM and avail the ITC for the same. It is right or wrong?

Can M/S ABC (Partnership Firm) charge GST on forward charge mechanism or BCD (Private Limited Company) liable to pay GST under RCM?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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04 December 2022 1 It's right.
2 Forward charge applicable.

Jignesh Savaliya

Jignesh Savaliya (Querist)
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04 December 2022 Can you give me notification or any reference number for 2 number answer. BCD Company says that RCM is applicable for this transaction.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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04 December 2022 Yes, BCD is right RCM applicable.

Notification No 05/2022- Central Tax (Rate) dated 13.7.2022 services by way of renting of residential dwelling to a GST registered person for either residential or commercial 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.

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