Reverse charge on service
This query is : Resolved
22 December 2017
I AM COMPOSITION DEALER. I AM PAYING RENT OF RS7000 PM.WHETHER I NEED TO PAY GST ON REVERSE CHARGE IF I DONT SHOW THIS RENT EXPENSES IN PROFIT/LOSS ACCOUNT AND TOOK IT IN CAPITAL ACCOUNT?
22 December 2017
RCM on the supplies from unregistered dealers is suspended from 13/10/2017. So you need not to pay GST on RCM.
28 December 2017
reverse charge is suspended on goods not service.your assumption is wrong.
22 July 2025
Here’s the clarification on your query about Reverse Charge Mechanism (RCM) on rent and composition dealer status:
Your situation:
You are a composition dealer under GST.
You are paying monthly rent of ₹7,000.
You want to know if you have to pay GST under reverse charge on rent, especially if you don’t show rent expense in Profit & Loss but capitalize it.
Key points:
Reverse charge on services from unregistered suppliers was suspended w.e.f 13/10/2017
Meaning if you take services from an unregistered person, you do not need to pay GST under reverse charge (for now).
Renting of immovable property (commercial) is a service liable to GST
But if the landlord is unregistered, and reverse charge on such services is suspended, then no GST under RCM.
Composition dealers generally do NOT pay output GST on supplies except on a few specified goods/services.
Composition scheme does NOT allow you to collect or pay GST on services like rent.
Reverse charge liability still exists but there’s confusion over whether it applies to composition dealers.
Capitalization of rent expense vs Profit & Loss treatment
This is accounting treatment and doesn’t affect GST liability.
Whether you capitalize or expense rent, GST liability depends on the nature of service and law, not accounting classification.
Conclusion:
Currently, reverse charge on services from unregistered persons (including rent) is suspended (subject to periodic updates).
So, as a composition dealer, you are not liable to pay GST under reverse charge on rent paid to unregistered landlord.
Your accounting treatment (capital or expense) does not affect GST liability.
If landlord is registered and charges GST, you pay GST as normal recipient.
Your situation:
You are a composition dealer under GST.
You are paying monthly rent of ₹7,000.
You want to know if you have to pay GST under reverse charge on rent, especially if you don’t show rent expense in Profit & Loss but capitalize it.
Key points:
Reverse charge on services from unregistered suppliers was suspended w.e.f 13/10/2017
Meaning if you take services from an unregistered person, you do not need to pay GST under reverse charge (for now).
Renting of immovable property (commercial) is a service liable to GST
But if the landlord is unregistered, and reverse charge on such services is suspended, then no GST under RCM.
Composition dealers generally do NOT pay output GST on supplies except on a few specified goods/services.
Composition scheme does NOT allow you to collect or pay GST on services like rent.
Reverse charge liability still exists but there’s confusion over whether it applies to composition dealers.
Capitalization of rent expense vs Profit & Loss treatment
This is accounting treatment and doesn’t affect GST liability.
Whether you capitalize or expense rent, GST liability depends on the nature of service and law, not accounting classification.
Conclusion:
Currently, reverse charge on services from unregistered persons (including rent) is suspended (subject to periodic updates).
So, as a composition dealer, you are not liable to pay GST under reverse charge on rent paid to unregistered landlord.
Your accounting treatment (capital or expense) does not affect GST liability.
If landlord is registered and charges GST, you pay GST as normal recipient.
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