In a significant move to tighten GST compliance and prevent revenue leakage, the Central Board of Indirect Taxes and Customs (CBIC) has issued Notification No. 09/2024-Central Tax (Rate), dated October 8, 2024. This notification mandates that the service of renting commercial properties by unregistered persons to registered persons will now fall under the Reverse Charge Mechanism (RCM). The new provisions will come into effect from October 10, 2024.
Under the RCM, the liability to pay Goods and Services Tax (GST) shifts from the supplier to the recipient of the goods or services. This amendment to Notification No. 13/2017-Central Tax (Rate) aims to address the issue of tax evasion in cases where unregistered persons were previously renting commercial properties, resulting in potential revenue losses.
Key Amendments
- New Entry in the RCM List: The notification adds a new entry, "5AB," under which the renting of any property, excluding residential dwellings, by an unregistered person to a registered person will be subject to RCM.
- Applicable Sectors: This change primarily affects the commercial real estate sector, where unregistered landlords lease properties to GST-registered tenants.
- Effective Date: The notification will come into force on October 10, 2024, ensuring a timely response to prevent revenue leakage.
Similar amendments have been made under the Integrated Goods and Services Tax Act, 2017 (IGST Act), and the Union Territory Goods and Services Tax Act, 2017 (UTGST Act), ensuring consistent application of this rule across states and union territories.
This notification is expected to increase GST collections by ensuring that registered recipients of commercial property rentals account for and pay the GST, closing a loophole that allowed some unregistered landlords to evade taxes. Businesses renting properties from unregistered persons should take note of this change to ensure compliance and avoid penalties.
Official copy of the notification has been attached
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