RCM on rent

[manish kataria]

Hi, I am running a retail shop in a residence where ground floor has been converted into shop and on the first floor the landlord is living. He pays property tax in mixed category ie ground floor tax as commercial and first floor tax as residential tax.I have opted for composition scheme under GST. In light of new notification wherein composition dealers are exempted to pay RCM on renting of commercial property, am I liable to pay RCM. My interpretation is that I am on a commercial property, so I should not pay RCM as I am a composition dealer

[Kapil Mahani]

As per the notification exempting composition dealers from RCM on renting of commercial property, you are not liable to pay RCM on the rent for your shop on the ground floor, provided it is classified as commercial property and you are operating under the composition scheme. 

[Shilpi Jain]

Its a commercial space that you have rented and you can take the exclusion and not pay GST under RCM.

[Yash Shah]

As per section 9(3) of the CGST act "The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both."

As per the notification no. 9/2024 of CGST, "If an unregistered person supplies the service by way of renting of any property other than residential dwelling to any registered person, then such registered person shall be liable to pay the GST under the reverse charge" 

As per the rate notification no. 07/2025 of the CGST act on the above entry after the word "Any registered person”, the words “other than a person who has opted to pay tax under composition levy”  shall be inserted.

As in our case, the ground floor is taxed as a commercial property rented to a composition dealer. The definition of commercial property is not provided in the CGST act so general commercial property means a property that is used for the commercial purpose. As shop is used as a retail shop that is for commercial purposes. 

Therefore as per the above provision and notification composition dealer is not liable to pay GST under RCM and also supplier is unregistered hence he shall not charge the GST on renting of commercial property.

AI Summary

Reverse charge on renting of commercial property excludes composition dealers, so tenant under composition need not pay GST. Renting of non-residential (commercial) property supplied by an unregistered person is generally taxable under reverse charge on the recipient, but a notification exempts persons who have opted for the composition scheme from that RCM obligation; accordingly a tenant registered under composition occupying a retail shop need not pay GST under RCM and an unregistered landlord will not charge GST on the rent.