RCM - Rent

[Ethirajan Parthasarathy]

A HUF consisting of Father and son owns a commercial property. It is let out to a firm in which son is a partner (75%) share, with third party. HUF is not registered under GST.

Due to financial problem in the firm, the landlord agrees to waive off rent for few months. My query is whether the firm and landlord will be treated as related parties, quantum of rent fixed can be questioned and whether RCM tax is still payable even though rent is waived off by the landlord.

[Shilpi Jain]

Firm and HUF would be related parties considering that the son has controlling powers under both.

GST liable on market value under RCM now sicne HUF not registered under GST.

AI Summary

Related party rent: recipient must pay GST under reverse charge on market value even if landlord waives rent.
The son's controlling interest makes the HUF and the firm related parties; rent from the HUF to the firm is therefore a related party supply. Because the HUF is unregistered, GST is payable by the recipient under the reverse charge mechanism on the market value of the rent, and this reverse charge liability arises even where the landlord waives payment.