RCM - Residntial Dwelling

[Ethirajan Parthasarathy]

As per recent amendment, Service by way of renting of residential dwelling to a registered person by any person is subject to RCM tax. I have two doubts about this entry :-

My view is a building is treated as “residential dwelling” based on original plan sanction & it will not become commercial building just because municipal tax / water tax are paid at commercial rate. Is my view correct.

In a particular situation, a residential dwelling let out for commercial purpose is situate in Bangalore & landlord resides in Chennai. Will the tenant be liable to pay IGST or CGST / SGST under RCM

[KASTURI SETHI]

If tenant is registered with GST, tenant will pay GST under RCM, otherwise FCM. Residential dwelling will be treated as commercial premises for the purpose of GST.

[Amit Agrawal]

When 'residential dwelling is rented to a registered person', liability to pay GST under RCM is on the recipient-registered person, irrespective of use (i.e. residential / commercial etc.) and irrespective of the fact that supplier is registered under GST or not.

As supplier and place of supply are in two different states, IGST @ 18% needs to be paid under RCM by the registered person who has received the renting of residential dwellings services.

If the recipient-registered person is not 'yet' registered in state where place where supply took place (i.e. State of Karnataka) for 'renting of residential dwelling', he needs to take compulsory registration u/s 24 (iii) read with Section 25 in the State of Karnataka.

Note of caution: One needs to further study about status of these premises as per applicable law/s / rules to see if these are still residential dwellings (or turned into commercial property) as per land / property records even when municipal tax / water tax are paid at commercial rate due to change in use. Though it is likely that these are still 'residential dwellings' as per land / property records & applicable laws / rules thereof, I have not studied these aspects.

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

[Ethirajan Parthasarathy]

Dear Shri.Amit

Compulsory registration rule may not apply since RCM tax is attracted only if the tenant is "Registered person"

Once he gets registered he will have to pay GST under forward charge on all his supplies even if turnover is below threshold limit

[Amit Agrawal]

Dear Shri Ethirajan Parthasarathy Ji,

I agree with you to the extent that compulsory registration u/s 24 (iii) will not come into play solely for subject entry under discussion here if recipient is otherwise not registered and not required to be registered either u/s 22 or due to Section 23.

This is my long-held constant position as can be seen from my posts on TMI (specially, serial no. 5) under issue-ID 118055bearing subject-line as ''GST on service of renting of residential dwelling w.e.f. 18-07-2022' as well as during very lengthy discussion we had under Issue ID 117679 bearing subject-line as 'RCM provisions on RWA (Residents Welfare Association)'.

I also agree with you that once registered, assessee needs to pay taxes on supplies on forward charge basis (assuming them not under RCM) even when turnover is below threshold limit prescribed u/s 22.

And I have not said anything contrary to above position, in my earlier posts even here.

I only said that"If the recipient-registered person is not 'yet' registered in state where place where supply took place (i.e. State of Karnataka) for 'renting of residential dwelling', he needs to take compulsory registration u/s 24 (iii) read with Section 25 in the State of Karnataka".

And this needs to be read in continuation of first two paras of my earlier post.

And for reasons behind my views, you may have a look at my article published on TMI (Article ID = 10589) bearing subject-line: Multiple registrations all over India on account of singular RCM provision (i.e. renting of residential dwelling Services) and Time to revisit tax compliance strategy:

Link: https://www.taxtmi.com/article/detailed?id=10589

I hope this clarifies my position.

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

[Ethirajan Parthasarathy]

Thanks Shri Amit

AI Summary

Reverse charge on renting of residential dwellings: registered recipients must pay GST and determine intra or inter state tax liability. Reverse charge applies to renting of a residential dwelling when the recipient is a registered person, requiring that recipient to pay GST under reverse charge; classification of the property as residential depends on applicable property records rather than municipal tax rates. If supplier and recipient are in different states, the registered recipient must pay IGST under reverse charge; state registration may be required in the state of supply, though compulsory registration solely due to this entry is contested. Once registered, the recipient must account for onward supplies under forward charge regardless of turnover.