RCM Applicability on land lease

As per the recent GST Council meeting, RCM (Reverse Charge Mechanism) is indeed applicable on the let-out of commercial properties to registered persons. However, regarding land lease by an unregistered dealer to a registered person, RCM is not applicable. RCM is only applicable when both the lessor (owner of the property) and lessee (the person renting the property) are registered under GST. If the lessor is an unregistered dealer, RCM does not apply. However, if the registered person (lessee) is receiving the service of land lease from an unregistered dealer (lessor), they may need to pay GST under the forward charge mechanism.

" If the lessor is an unregistered dealer, RCM does not apply. However, if the registered person (lessee) is receiving the service of land lease from an unregistered dealer (lessor), they may need to pay GST under the forward charge mechanism."

I didn't get this. We can't discharge liability under FCM unless the lessor is a registered dealer. 

GST Reverse Charge Mechanism (RCM) on Rent Paid for Land

1. RCM on Rent: As per Notification No. 09/2024 – Central Tax (Rate) dated October 8, 2024, reverse charge is applicable on rent paid for the use of land if:
• The landlord (landowner) is unregistered under GST.
• The tenant (e.g., builder) is a registered person.
2. Inclusivity/Exclusivity: GST under RCM is exclusive of the rent amount. For instance, if the rent agreed is ₹1,00,000, the GST liability is calculated separately on this amount.
3. Rate of GST: The rate applicable 18% under RCM for renting of land typically depends on the nature of the lease (e.g., long-term, commercial).
4. Effective Date: This notification is effective from October 10, 2024.

Example

• Scenario: A builder rents land from an unregistered individual for ₹1,00,000 per month.
• GST Liability under RCM: Assuming a GST rate of 18%:
• Rent: ₹1,00,000
• GST @ 18%: ₹18,000
• Total Outgo: ₹1,18,000
• The builder pays ₹1,00,000 to the landowner and deposits ₹18,000 directly as GST under RCM.