residential dwelling RCM

[Madhavan iyengar]

dear sirs

where the rent is paid for residential dwelling taken on rent in advance for july 22 ie before the 10th of july 22 by a gst regd person is the regd person require to discharge rcm or for july since the rent payment is already made prior to 18th july 22 hence he is not required to pay rcm for july 22

experts please give your views

[Amit Agrawal]

For 'renting of residential dwelling services' which are supplied till 17.07.2022 (in terms of Section 13 (2) read with Section 14 of the CGST Act 2017), RCM provisions will not apply.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Kunal Agrawal]

The Time of Supply will be 10th July and RCM is effective from 18-07-2022. Hence, in my opinion no RCM.

[KASTURI SETHI]

Here Section 14 of CGST Act is into play. I concur with the views of Sh.Amit Agrawal Ji.

[Ganeshan Kalyani]

Service received, payment made, invoice raised/received - if any of these two instances is before 18.07.22 then GST is not applicable. Otherwise, yes GST is applicable.

[Shilpi Jain]

Section 14 overrides section 12 and 13. I concur with the view of Amit ji though it is only as per Section 14.

In this case I am assuming that the agreement mentions that the payment or the invoice for the service is to be on or before 10th (continuous supply of service). In such case the service is provided by 10th and payment also made by 10th. Hence, new provision not applicable . RCM not applicable.

[Amit Agrawal]

Section 14 comes into picture only where there is a change in the rate of tax.

Changes in tax-rate (w.r.t. 18.07.2022) are for 'services by way of renting of residential dwelling for use as residence' and not for 'services by way of renting of residential dwelling for use other than 'as residence'.

So, Section 14 will not come into picture only for 'services by way of renting of residential dwelling for use as residence' and NOT for 'services by way of renting of residential dwelling for use other than 'as residence''.

From query raised, nature of use (as agreed between landlord & tenant) was not forthcoming. Hence, I was guarded in my earlier response because applicability of Section 14 is not universal in given situation but dependent of nature of use. And, I stand by what I said earlier.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

Changes in RCM provisions (w.r.t. 18.07.2022) are for 'Service by way of renting of residential dwelling to a registered person' irrespective of use (i.e. residential / non-residential).

But, Section 14 have no role to play solely because subject services are brought into RCM w.e.f. 18.07.2022. However, section 14 will definitely come into play (i.e. even for determining liability under RCM) where there is change of rate of tax (i.e. the situation where exemption was withdrawn - 'services by way of renting of residential dwelling for use as residence')

Furthermore, Section 14 (b) deals with case/es where the goods or services or both have been supplied after the change in rate of tax while 'the time of supply' u/s 13 is for liability / payment of gst.

In the context under discussion, one also needs to take note of Section 31 (5) which deals with raising tax-invoice in case of continuous supply of services.

Now, if there is clear agreement between tenant / landlord for lease / rental for 11 months or so and the material date - 18.07.2022 - falls some-where in-between that agreement and if rent is supposed to be paid by 10th of start of the month (which is general practice), then, following issues are worth consideration:

1. When services are supplied? At start of execution of agreement or continuously everyday over period of 11 months (i.e. period of lease / rental agreement) or at start of every month for that month.

2. If services are continuously supplied for everyday for 11 months (i.e. period of lease / rental agreement), what happens when supplier does not raise invoice till 17.07.2022 despite due date of paying rent for entire month of July, 2022 was 10.07.2022 and rent was also received on 10.07.2022 and ignoring the requirement of Section 31 (5).

3. Generally, such agreement does not either have pre-mature termination clause or have period of notice for early termination is pre-decided therein. And it is presumed that we are dealing with a situation where such event is not under consideration.

Main question/s - in the context under discussion here - is whether Section 14 (b) will come into play in above scenario just because landlord failed to raise invoice on or before 17.07.2022.

As there are multiple legal issues are involved here and some of them are dependent upon nature / contents of agreement between landlord and tenant, I was guarded in my response in my post at serial number 1 above.

Hence and in summary, I stand by what I said earlier in my post at serial number 1 above.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Shilpi Jain]

There is lack of clarity in the query whether the renting was from an unregistered person earlier and was not liable to gst. Also the usage of the residential dwelling is not known. If that was used for residence then it was exempt earlierand now because of the change in provisions there is a liability on the registered person.

if in fact there is change in rate ofntax then section 14 will apply, else will not apply

[KASTURI SETHI]

Perfect reply by Madam Shilpi Jain.

AI Summary

Reverse charge mechanism may not apply where rent payment or invoice preceded the change in RCM and time of supply occurred earlier. Whether the reverse charge mechanism applies turns on whether supply, payment or invoice for renting a residential dwelling occurred before the effective date that brought such renting into RCM; continuous supply treatment, time of supply rules and invoice raising requirements determine if the taxable event falls before that date, and the nature of use (residential versus non residential) and any change in exemption or rate further affects applicability.