Service by way of renting of any immovable property other than residential dwelling.

[CABayyaReddy DK]

Sir, Now Service by way of renting of any immovable property other than residential dwelling is brought under RCM vide Notification No. 09/2024-Central Tax (Rate) dated: 8/10/2024.

Queries are

01. What if Commercial rental income is exceeds Rs. 20 lakhs per year?

02. What if commercial property landlord is a non - resident individual?

03. Liability to register in Karnataka for commercial rental Income is Rs. 40 lakhs or 20 lakhs?

Please advice

[Sadanand Bulbule]

The GST Act explicitly mentions that renting of immovable property for commercial purpose is a supply of service and taxable at a rate of 18%. However, small taxpayers with an annual  aggregate turnover below Rs. 20 lakhs are exempt from GST registration.

So liability to register is Rs. 20 lakhs and above per FY in respect of such service providers.

[KASTURI SETHI]

I concur with the views of Sh.Sadanand Bulbule, Sir.

Bangalore State does not fall under Special Category. Refer Notification No. 10/19-CT dated 7.3.19 as amended vide 354/25/2019-TRU dated 29-03-2019, Notification Nos.  3/2022-C.T. dated 31-03-2022 and 15/2022-C.T. dated 13-07-2022

[Shilpi Jain]

Assuming this taxpayer has only rent from commercial property and no other income, in cases where the rent crosses 20L also no registration required. Refer notification 5/2017-CGST which provides exemption from registration where total supplies are liable under RCM.

Commercial property rented to NRI - who is registered under GST - then answer remains same. Else once 20L is crossed, registration required.

3. Ans. - 20L. 

[Yash Shah]

As per section 9(3) of the CGST act read with notification 9/2024  A service received from an unregistered person to a registered person by way of renting of any immovable property other than a residential dwelling, such registered person shall be liable to pay the tax under reverse charge mechanism.

As per section 22(1) of the CGST act, Every supplier shall be liable to be registered under this Act in the state or union, other than special category States, from where he makes a taxable supply of goods or services or both if his aggregate turnover in a financial year exceeds twenty lakh rupees.

Query 1: As per perusal of the above provision where commercial rental income exceeds Rs. 20 lakh per year, such person shall be liable to take registration under the GST act and as notification covers where supply is made by an unregistered person to registered person hence he is liable to pay tax under forward charge in respect of the supply of renting of immovable property other than a residential dwelling

Query 2: As per clause v of section 24, a non-resident taxable person making taxable supply is required to take compulsory registration irrespective of the threshold provided in section 22. As notification states if a supply is received from an unregistered person to a registered person then the recipient of such service shall be liable to pay tax under RCM. As a non-resident taxable person is not an unregistered person therefore he shall be liable to pay tax under forward charge for the supply made of renting of immovable property other than a residential dwelling.

Query 3: As per perusal of section 22 of the CGST act, there is no provided threshold for specific income as it states that if aggregate turnover exceeds Rs 20 lakh he shall be liable to take registration under Karnataka GST act so if there is only a commercial rental income he shall be liable to take registration if commercial rental income exceeds 20 lakh in the financial year.

AI Summary

Reverse charge on commercial rent: recipient pays GST when landlord is unregistered; registered or non resident landlords bear forward charge. Commercial renting of immovable property is taxable and placed under the reverse charge mechanism (RCM) when a registered person receives the supply from an unregistered supplier; if the supplier is registered or is a non resident taxable person, the supplier bears tax under forward charge. Registration is required when aggregate turnover exceeds the statutory threshold, and non resident taxable persons must register irrespective of turnover.