GST at 18% applies under reverse charge mechanism when registered persons rent residential premises regardless of usage purpose

AAR Odisha ruled that GST at 18% applies under reverse charge mechanism when registered persons rent residential premises, regardless of usage purpose. The applicant company renting residential properties in New Delhi and Jaipur for employee guest house accommodation must pay GST under RCM. The ruling clarified that residential dwelling rental to GST-registered persons attracts RCM provisions irrespective of whether used for residential or commercial purposes, effective from July 18, 2022.

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Issues involved:
Whether service received by a registered person by renting residential premises used as a guest house is subject to GST under Forward Charge Mechanism (FCM) or Reverse Charge Mechanism (RCM)Rs.

Analysis:

Issue 1: Applicability of GST on renting residential premises for a guest house

The applicant sought an advance ruling on whether renting residential premises for use as a guest house by a registered person attracts GST under FCM or RCM. The applicant provided details of renting properties in New Delhi and Jajpur for employee accommodation. The Central Board of Indirect Taxes and Customs defined "residential dwelling" as any residential accommodation excluding places like hotels or guest houses. The applicant highlighted amendments in notifications making services to registered persons taxable under RCM. The GST Council decision in June 2022 brought renting of residential dwellings under the tax net, with RCM applicable to services provided to registered persons.

Issue 2: Interpretation of Notification No. 05/2022-Central Tax (Rate)

The CBIC notification dated July 13, 2022, specified that renting residential dwellings to registered persons attracts GST under RCM. The notification clarified that the nature of use of the property by the recipient does not affect the RCM applicability. The notification outlined the tax implications for different scenarios, emphasizing that residential properties rented to registered persons are subject to RCM, regardless of the purpose of use. The ruling concluded that services received by the applicant for renting residential premises as a guest house are subject to GST under RCM as per Notification No. 05/2022-Central Tax (Rate).

Conclusion:
The ruling confirmed that services received by a registered person for renting residential premises as a guest house are subject to GST under RCM. The applicant or jurisdictional officer can appeal to the Odisha State Appellate Authority for advance ruling within 30 days if aggrieved by the decision.

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