Recent Notices from State Tax Department Regarding RCM on Rent

[Ramanathan Seshan]

Dear experts,

Lately, we have been receiving notices from the state tax department titled "Endorsement." These notices relate to the scrutiny of our GSTR-3B returns. The department has pointed out that RCM liability has not been discharged on rent paid to the landlord, where the landlord is an unregistered person. This is claimed to be in contravention of Notification No. 9/2024-Central Tax (Rate), dated 08-10-2024.
The notice instructs us to:

• Discharge the applicable RCM for the said period within 7 days, and

• Submit proof of payment to the department.

However, the notice does not mention the specific section of the CGST Act under which it has been issued. This raises a few concerns:

• Is such a notice legally valid without citing the relevant legal provisions ?

• What specifically is Endorsement ? 

Regards,

S Ram

[Sadanand Bulbule]

Sir

Before questioning the credibility of the subject "Endorsement", get the facts double checked about the liabilty to pay tax on rent under RCM. Thats more importanat than testing the legality of the enodorsement and comply accordingly. You know your facts better than the department.

[Ramanathan Seshan]

Sir,

Agreed, we are being compliant to the law ever since its inception.

 

[KASTURI SETHI]

Full facts have not been disclosed by the querist. 

I fully endorse the reply of Sh. Sadanand Bulbule, Sir.

[Ramanathan Seshan]

Dear sirs,

Company has taken office premises on rent. The notice has only the following contents:

This is to inform you that, upon scrutiny of your GSTR-3B returns for the tax periods from October 2024 to May 2025, the following discrepancy has been observed:

It has been noted that if you are operating your business (Principal place / Additional place) from a rented premises, you have not discharged tax liability under Reverse Charge Mechanism (RCM) on the rent paid to the legal owner of the premises, who is an unregistered person. This is in contravention of Notification No. 9/2024–Central Tax (Rate), dated 08-10-2024.

You are hereby directed to discharge the applicable tax liability under RCM for the said periods within 7 days and submit proof of payment to this office.

Failure to respond within the stipulated time will be treated as your acceptance of the discrepancy, and appropriate proceedings under the provisions of the GST law may be initiated against you without any further reference.

Regards,
S Ram

[KASTURI SETHI]

Small errors do not vitiate the legal validity of the SCN.

[KASTURI SETHI]

In continuation of my reply  at  serial no. 2.1, the department has power to issue corrigendum at any time before the adjudication of the SCN.

[KALLESHAMURTHY MURTHY K.N.]

Sir,

The query does not disclose how the endorsement contravenes Notification No. 9/2024-Central Tax (Rate), dated 08-10-2024..

As per Entry No. 5AA of Notification No. 13/2017-Central Tax(Rate) dated 28-06-2017, Service by way of renting of residential dwelling by ANY PERSON to a registered person is subject to ‘RCM’ effective from 18th July 2022.

Notification no. 04/2022-Central Tax (Rate) dated 13th July 2022, amended the exemption Notification no. 12/2017-Central Tax (Rate) dated 28th June 2017; and Notification no. 05/2022-Central Tax (Rate) dated 13th July 2022 –brought into effect of reverse charge under renting of residential property by amending notification no. 13/2017-Central Tax (Rate) dated 28th June 2017.

The Notification No. 9/2024-Central Tax (Rate), dated 08-10-2024, amends the words “ any property” to “any immovable property”.

Hence, the Endorsement was rightly issued.

Not mentioning of Section in the Endorsement does not take over the taxability.

This is my view only .

[Ramanathan Seshan]

Thanks sir

[Shilpi Jain]

This may be a general communication that goes to all taxpayers. It says "....if you are operating from rented premises....."

So only in case you are falling under those criteria mentioned in the communication you need to pay GST. Else you can just reply mentioning no such instance and no further liability.

[Ramanathan Seshan]

Thanks Shilpi mam

AI Summary

Reverse charge on rent: requirement to discharge RCM for business premises rented from unregistered owners following departmental endorsement.
Departmental endorsements direct taxpayers to discharge Reverse Charge Mechanism (RCM) on rent paid to unregistered owners where business is conducted from rented immovable premises, citing amendments that extend reverse charge to immovable property; the notice may omit statutory section references but small drafting errors do not negate the substantive taxability, and applicability depends on whether the taxpayer actually occupies rented premises supplied by an unregistered person.