GST on Renting of Residential Property

There has been a lot of buzz going around the applicability of GST on renting of residential property after the 47th GST Council meeting recommended that GST be made applicable in case the residential property has been rented out to a registered person under GST w.e.f. 18th July, 2022.

Let's us first understand the status of GST Law on and before 17th July, 2022 in respect of GST on on renting of residential property:

Vide Notification No. 12/2017 dated 28/06/2017 several supply of services were exempted under the GST Act which included services by way of renting of residential dwelling for use as residence.. Thus, GST was not applicable on the renting of residential property irrespective of the status of the person (registered/un-registered).

Also, Now, let us understand what has changed after recommendation of 47th GST Council meeting w.e.f. 18th July, 2022 :

• CBIC has withdrawn the exemption provided to registered person vide Central Tax (Rate) Notification No. 04/2022 dated 13/07/2022 
• CBIC has notified the following under RCM vide Central Tax (Rate) Notification No. 05/2022 dated 13/07/2022 :

Now, the same has clarified by PIB that renting of a residential unit is taxable only when it is given to a business entity :

• Renting of residential unit taxable only when it is rented to business entity
• No GST when it is rented to private person for personal use
• No GST even if proprietor or partner of firm rents residence for personal use

Now, let us evaluate the various scenarios to understand the impact of applicability of GST on renting of residential property w.e.f. 18th July, 2022 :

• Tenant & Landlord registered under GST  : In case tenant and landlord both are registered under GST, then the liabilty to pay GST will arise on the tenant under the reverse charge mechanism. And accordingly tenant will elgible to claim ITC.
• Tenant registered under GST rents property from unregistered Landlord : In this case the liability arises on the tenant under the reverse charge mechanism. And accordingly tenant will elgible to claim ITC.
• Tenant unregistered under GST rents property from registered Landlord : In this case the liability of GST doesn't arises since the same has still been covered Vide Notification No. 12/2017 dated 28/06/2017.
• Tenant & Landlord unregistered under GST : in this case the liability of GST doesn't arises since the same has still been covered Vide Notification No. 12/2017 dated 28/06/2017.

Now, there may be some other scenarios as well:

• Company/LLP/Firm/AOP/BOI rents a residential dwelling for the purpose of residence on rent for employees : In this case GST will be paid under RCM and ITC can be claimed.
• Composition Dealer (registered) rents a residential dwelling for the purpose of residence on rent : In this case GST will be paid under RCM, however GST paid under RCM cannot be claimed as ITC as per the provisions applicable to composition dealer.
• An individual registered under GST as a proprietorship concern takes a residential dwelling for the purpose of residence on rent for himself : In this case GST should be paid under RCM and GST paid under RCM cannot be claimed as ITC since the same is a blocked credit as per the provisions of GST Act. However, as per the clarification by PIB on Twitter, No GST is applicable.

Disclaimer : The views expressed by the author is based on his understanding of law and the prevailing circumstances. Taxpayers are requested to use the views judiciously and author shall not be liable for any gain/loss which might arise by referring his article.

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