Blog

Blog Details

GST on Renting of Residential Dwelling

The latest GST council meeting has announced a plethora of changes in the GST law including changes in rates, withdrawal of exemptions and changes in procedures. One such change is concerning the applicability of GST in respect of services by way of renting residential dwellings for use as residences.
 
Renting of residential dwellings was exempted from the levy of GST till the change which was brought in recently. However, vide Notification No. 4/2022-CT (Rate) dated 13th July 2022 the exemption has been withdrawn. Now, as per this notification with effect from 18th July 2022, if the residential dwelling is given for rent for residential purposes to a person who is registered under GST, this service will be chargeable to tax.
 
Further, vide Notification No. 5/2022-CT (Rate) dated 13th July 2022 it has been clarified that the tax on the said service of renting a residential dwelling to a registered person shall be payable under the Reverse Charge Mechanism (RCM) by the recipient of the service, that is, the registered person. Further, if the recipient of the service is not registered under GST, the supply of service shall continue to remain exempt.
 
One thing that may be noted is that the rate for this service has not been prescribed. Rates for hotel accommodations are specified @ 12% and 18% depending upon per-day room rates, but this may not cover the case of renting residential units. So, if the separate rate is not specified for renting residential dwellings, the rate would be 18%. Another issue which might be considered here is if the owner of a business (an individual) has taken a residential unit for his purposes in his capacity, whether he shall have to pay GST on RCM basis or as it is for his purposes it will be outside the purview of GST.
 
Bringing renting of residential dwellings within the purview of GST is an important change and let’s hope the Government would come out with necessary explanations and/or amendments to clarify certain issues.

Share: