The GST Council made recommendation to the Government to impose GST on a person who has given residential property to the registered person (GST Registered Person) to renting of residential dwellings (Living) with effect from 18.07.2022 in its 47th meeting at Chandigarh on 28th &29th of June’2022. Prior to 18.07.2022, a person who has given a residential property for residential purpose (Other than Commercial purpose) was exempted from GST Tax as per Notification No.12/2017-C.T. Dated.28.06.2017. Now as per 47th GST Council recommendations, CBIC has given Notification No.4/2022- Central Tax (Rate), Dated.13.07.2022 withdrawing such exemptions. Now onwards, as per Notification No. 05/2022-Central Tax Rate) dated. 18.07.2022, an unregistered person (Not registered under GST) who has given the residential house property rented out to a registered person (Registered under GST) the tenant (registered GST person or firm) is liable to pay GST under Reverse Charge Mechanism. If a residential property owner (Landlord) is unregistered under GST Law, he has given such residential property to a registered person (Registered under GST Law), for use the purpose of residential under that circumstance, Tenant is liable to pay GST tax @18% under Reverse Charge Mechanism (RCM) as per Notification No. 05/2022-Central Tax Rate) dated. 18.07.2022.
Example-1: When a company takes a residential house property for use of residence on rent for employees if will be considered as an item of business expenditure. GST Tax will be paid @18% under RCM and eligible to claim Input Tax Credit by the company.
Example.2: When a person is having GST registration under Composition Scheme, takes a residential house property for the purpose of residence on rent then it will be considered as an item of business expenditure. GST Tax will be paid under RCM but not eligible to claim input tax credit as per Section 10(4) by a composition dealer.
Example.3: When an individual who is registered taxpayer under GST ,2017, as a proprietary concern, takes a residential house property for the purpose of residence on rent for him / her / family then it will be considered as an item of personal expenditure and not the business expenditure of a proprietary concern . GST tax will be paid under RCM but the ITC of the GST tax paid under RCM be claimed as it is blocked as per Section 17(1) of the CGST Act,2017.
Example.4: When a company, registered under GST Law takes a residential property on rent for one of its director for residential purposes, then such company have to pay GST Tax @18% under RCM as per Notification No. 05/2022-Central Tax Rate) dated. 18.07.2022 and thereafter, claim input tax credit (ITC) on the same.
Example.5: An unregistered person (Un-registered under GST) has given a residential house property to an unregistered person (Un-registered under GST) on monthly basis for use for residential purpose, under that circumstances TENANT is not liable to pay GST. Because it is exempted as per Notification No.12/ 2017- C.T. Dated. 28.06.2017.