GST on Residential Dwelling/ GST on residential property:
Until now GST was not charged on renting of residential property to any person for residential purpose and hence people who were renting their residential property i.e. house or bungalow were not required to charge any GST or pay any GST.
Hence, even the landlord who were registered under GST were not charging any GST on their residential property as the same was exempt from GST.
However, now the government has amended the provisions with regard to renting of residential property wherein by way of Notification No. 05/2022 Central Tax (Rate) Dt. 13.07.2022 it has been mentioned that Any person providing service by way of renting of residential dwelling to a registered person, the registered person needs to pay GST under reverse charge.
Such Amendment has been made in earlier notification Dt. 13/2017 Central Tax (Rate) which was last amended by notification no. 29/2019 Central Tax (Rate).
Hence, according to the above notification the amendment has been made in relation to Section 9 of the CGST Act and accordingly the GST needs to be paid under the Reverse Charge by the recipient of service.
What does Reverse Charge means under GST Law?
Reverse Charge means the liability to pay tax is on the recipient of supply of goods or services instead of the supplier of such goods or services in respect of notified categories of supply.
As per the provisions of section 9(3) of CGST / SGST (UTGST) Act, 2017 / section 5(3)of IGST Act, 2017, the Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.
The service of paying rent on residential property is covered under section 9(3) of the CGST Act.
What is the Impact?
Any Freelancer or Individual person who is registered under GST and has rented a residential house for use of same as his office needs to be pay GST on such rent being paid under reverse charge basis at the rate of 18% to the government and then claim a ITC of same.
Hence, now this will be an additional cash cost for all such persons although.
To read the notification CLICK HERE: Notification No. 05/2022 Dt. 13.07.2022
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