RCM is to be paid for rent paid

Notification No. 09/2024 – Central Tax (Rate), dated October 8, 2024. This notification brings under the ambit of the Reverse Charge Mechanism (RCM) the renting of commercial property when an unregistered person provides the service to a registered person. The new rule will be effective from October 10, 2024.

As per Entry No. 5AA of Notification No. 13/2017-Central Tax(Rate) dated 28-06-2017, Service by way of renting of residential dwelling by ANY PERSON to a registered person is subject to Reverse Charge Mechanism (‘RCM’). This entry was applicable w.e.f. 18th July 2022. The above entry implies that the registered recipient, availing services of renting of residential property, is supposed to discharge GST on RCM basis. In this case RCM is applicable even if the supplier is unregistered or the property is used for commercial purposes. Recently, Entry No. 5AB is added to the Notification for levying RCM on commercial properties. The said entry states that RCM is applicable on Service by way of renting of any property other than residential dwelling by unregistered person to a registered person. This entry is applicable w.e.f. 10th October 2024. 

Dear Mr. Dhirajlal Rambhai Ji,

Your reply is very clear, as always, very helpful.

I have some doubts, please help.

1) Is ther any threshold limit for rent amount to fall under RCM.

2) Can register person use that ITC credit of RCM paid on rent.

Thanks in advance 

1. The threshold limit applied only for registration under GST act; or for TDS deduction. Not over rent paid by registered person (to unregistered landlord).
2.  Yes, if regular supplier having taxable supplies; not if composition dealer.

Thank you sir for yor prompt reply.

You are welcome.            

Thanks for clarifying that. Much appreciated! URL

My Pleasure.                           

Yes, RCM applies on your office rent if your landlord is unregistered under GST and you are a registered person. Notification 09/2024-CTR effective October 10, 2024 made this mandatory.

You pay 18% GST on the rent amount under RCM. This is reported in GSTR-3B Table 3.1(d) as inward supply liable to RCM. The same tax is reported in Table 4A(3) as ITC on RCM.

On ITC: YES, you can claim ITC on commercial office rent RCM ,  provided the space is a commercial property used for your business. The ITC is available in Table 4A(3) of GSTR-3B in the same period you pay the RCM tax.

This is different from residential property RCM: for residential accommodation taken by a registered person, the ITC is blocked under Section 17(5)(g) of CGST Act. Commercial office space does not have this block.

Practical note: the ITC and RCM tax entry in GSTR-3B in the same period effectively means you have zero cash outflow. The RCM paid as cash becomes ITC which offsets other output tax. Only if you have no output tax liability would there be a cash cost.

For the full GSTR-3B Table 3.1(d) and Table 4A(3) entry walkthrough for commercial rent RCM, this [GST on rent guide](https://taxgarden.in/blog/gst-on-rent-commercial-residential-rcm-itc-guide) explains the reporting.

Dear sir I have question I am an individual/NRI landlord having only two taxable supplies, being rental of commercial immovable properties to two GST-registered tenants. The rental services are covered by Entry 5AB of Notification No. 13/2017-Central Tax (Rate), as inserted by Notification No. 09/2024-Central Tax (Rate), under which GST is payable by the registered recipient under RCM. I understand that Notification No. 5/2017-Central Tax exempts persons who are exclusively making taxable supplies on which the entire tax is payable by the recipient under reverse charge from obtaining GST registration. My aggregate rental turnover exceeds ₹20 lakh. Please clarify whether I am nevertheless required to obtain GST registration under Section 22(1) of the CGST Act, or whether the exemption under Notification No. 5/2017-Central Tax read with Section 23(2) continues to apply because all my taxable supplies are subject to RCM.

RCM on rent depends on the landlord, tenant and property. For commercial property rented by an unregistered landlord to a GST-registered tenant, the tenant generally pays GST under reverse charge, subject to the applicable conditions. If the landlord is registered, rent is ordinarily taxed under forward charge by the landlord. For residential premises, RCM generally applies when rented to a GST-registered person; specified registered persons renting residential property for personal use may be exempt. The exact treatment depends on these facts and any applicable exemption.

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