GST RCM on rent-applicability in the case of property taken on lease

[Prashanth G]

One of the clients- a dealer registered under GST- is running his business in a shop taken on lease for 8 years by paying Rs 8 lakhs as the lease amount. As per the terms of lease, this amount will be refunded by the Lessor after the lease period.

Whether GST RCM on rent is applicable on this case? If yes, how to calculate monthly rent / RCM?

AI Summary

Reverse charge on rent applies when lessor is unregistered; refundable deposits taxable only if adjusted against rent.
A refundable security deposit that does not influence rent is not taxable; if adjusted against rent or forfeited it becomes taxable as rent. Notional interest is taxable only when it affects rental consideration. If the lessor is registered, the lessor charges GST on rent; if unregistered, the lessee pays tax under the reverse charge mechanism. Refundable deposits are excluded from reverse charge unless adjusted to rent. Lease agreements should state refundability and non-impact on rent and valuation should follow market-value principles when taxability arises.