Credit against paud RCM on rent

No, you cannot claim ITC on the GST paid under RCM for rent if your salon business's outward supplies are ineligible for credit under GST rules. You must pay the RCM amount entirely using your Electronic Cash Ledger, and since it cannot be claimed as credit, it should be treated as a business expenditure in your accounting books.

For a salon registered under GST with taxable output (18% GST on services), you CAN claim ITC on GST paid via RCM on rent.

Here is the breakdown:

Section 17(5) blocks ITC on specific items like food and beverages, club memberships, health and fitness services consumed for personal use, and beauty treatment services consumed personally - not on business premises rent. Rent on your salon premises is a business input, not a personal consumption item, so it does not fall under any of the 17(5) exclusions.

For RCM on rent - how to claim: Report the RCM tax liability in GSTR-3B under Table 3.1(d). Then claim the same amount as ITC in Table 4A(3). Both entries offset in the same return period, resulting in zero net cash outflow for that RCM amount.

One scenario where ITC could be restricted: if your salon provides any exempt supplies alongside taxable services, you would need to reverse a portion of ITC under Rule 42/43. If all your salon services are taxable, you should be able to claim the full ITC.

If your consultant told you ITC is blocked, ask specifically which clause of Section 17(5) applies to rent. I have not come across a specific blocking entry for commercial rental expense.

Our GST team at Tax Garden has handled several similar ITC eligibility queries - if you want a second opinion with specifics of your case, feel free to reach out via taxgarden.in