Recent amendment on GST

Recent amendment on GST applicability on renting of residential property

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Recent amendment on GST applicability on renting of residential property

47th GST council meeting had come up with various recommendations under GST. In order to give effect to the said recommendations, recently several notifications and circulars were issued by the CBIC.

One of the important recommendations relating to renting income as proposed by the 47th GST council meeting was the withdrawal of exemption relating to renting of a residential dwelling to the registered business entities. Accordingly, giving effect to the said recommendation, the following two notifications, amending the old notifications, were issued by the Government –

Particulars New notifications Old notifications which are amended vide the new notifications
Notification covering exemption available under GST Notification no. 04/2022- Central Tax (Rate) dated 13th July 2022 [amendment effective from 18th July 2022] Notification no. 12/2017- Central Tax (Rate) dated 28th June 2017
Notification covering applicability of reverse charge mechanism Notification no. 05/2022- Central Tax (Rate) dated 13th July 2022 [amendment effective from 18th July 2022] Notification no. 13/2017- Central Tax (Rate) dated 28th June 2017

The said amendment relating to the applicability of GST on renting of residential property is briefly covered in the present article.

GST applicability on renting of the residential property till 17th July 2022 –

Since the inception of Goods and Services Tax (GST) i.e. from 1st July 2017, an exemption was available under GST to any person engaged in providing services of renting of residential dwelling specifically for the purpose of residence. Notably, the exemption as contained in notification no. 12/2017- Central Tax (Rate) dated 28th June 2017 at Sl. No. 12 is tabulated hereunder –

Heading Description of service Rate Condition
Heading 9963/ Heading 99721 Services by way of renting of the residential dwelling for the use as a residence NIL NIL

From the above, it is amply clear that unconditional exemption was provided to renting of a residential dwelling to any person when the same is used for residence. Meaning thereby, GST was payable in the case of renting of a residential dwelling to any person when the same is used for the commercial purpose.

GST applicability on renting of residential property as effective from 18th July 2022 –

Vide notification no. 04/2022- Central Tax (Rate) dated 13th July 2022, said Sl. No. 12 of notification no. 12/2017- Central Tax (Rate) dated 28th June 2017 was amended. According to the amendment, after the words ‘as residence’, the words ‘except where the residential dwelling is rented to the registered person’ is to be added.

Hence, post issuance of notification no. 04/2022- Central Tax (Rate) dated 13th July 2022, Sl. No. 12 as effective from 18th July 2022 will read as under –

Heading Description of service Rate Condition
Heading 9963/ Heading 99721 Services by way of renting of the residential dwelling for the use as a residence except where the residential dwelling is being rented to the registered person NIL NIL

Hence, with effect from 18th July 2022, GST applicability on renting of residential dwelling will be as follows –

Particulars GST position post 18th July 2022
Renting of residential dwelling for residential purpose to the person registered under GST

Taxable from 18th July 2022

[Exempted from 1st July 2017 till 17th July 2022 and Taxable from 18th July 2022]
Renting of residential dwelling for residential purpose to the person not registered under GST Exempted from 1st July 2017
Renting of residential dwelling for commercial purpose to the person registered under GST Taxable from 1st July 2017
Renting of residential dwelling for commercial purpose to the person not registered under GST Taxable from 1st July 2017

Corresponding amendment in Reverse Charge Mechanism on services relating to renting of residential dwelling –

Notification no. 13/2017- Central Tax (Rate) dated 28th June 2017 is the basic notification which covers the list of services on which Reverse Charge Mechanism is applicable. Notification no. 05/2022- Central Tax (Rate) dated 13th June 2022 inserted Sl. No. 5AA to notification no. 13/2017- Central Tax (Rate) dated 28th June 2017. The said Sl. No. 5AA is tabulated hereunder –

Sl. No. Description of service Service provider Service receiver
5AA Services by way of renting of the residential dwelling to the registered person Any person Any registered person

Accordingly, the registered person (i.e., service receiver) availing services by way of renting of the residential dwelling is liable to pay GST under Reverse Charge Mechanism. In nut-shell, even if the service provider of the renting of residential dwelling is registered under GST, the registered service receiver will be liable to discharge the GST under Reverse Charge Mechanism.

Conclusion of applicability of GST on renting of residential property –

The following table summarizes the applicability of GST on renting of residential property with effect from 18th July 2022 –

Particulars GST applicability GST payable by the service provider GST payable by the service receiver
Services of renting of residential dwelling for residential purpose to the person registered under GST Taxable under GST from 18th July 2022 No Yes
Services of renting of residential dwelling for residential purpose to the person not registered under GST Exempted NA NA

 

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CA Poonam Gandhi is a Chartered Accountant and a Lawyer. With a wide practice experience and deep understanding of different laws and taxes, she has been an independent professional writer in the field of taxation, finance and laws.