RCM on rent Composition tax dealer

[KS Bhat]

Sir/Madam

1. Composition Tax dealer need to pay GST under RCM on rent payment to unregistered owner ?

2. Can Mutual fund distributor can opt composition scheme ?

3. Can GST registered as regular can opt composition scheme any time during the year ?  

 

[Fahiyaz Ahmmed]

1) Since you are registered under GST and it is assumed that the rented residential property is being used for business purposes, GST under the Reverse Charge Mechanism (RCM) is applicable. You are required to pay GST at the applicable rate (generally 18%) on the rent paid to the unregistered owner. Since you are a composition dealer, ITC is not available for you   

2) In my view, a Mutual Fund Distributor is not eligible for the Composition Scheme under GST because the nature of their services typically involves working with Asset Management Companies (AMCs) and sometimes through e-commerce-like platforms. These platforms are often required to deduct TDS under Section 52 of the CGST Act, which disqualifies a person from opting for the Composition Scheme as per Section 10(2)(d).

3) No, switching to the Composition Scheme is not allowed during the financial year.

If your aggregate turnover in the previous financial year was:

Up to ?1.5 crore (in case of supply of goods), or Up to ?50 lakh (in case of services under Section 10(2A)), then you can opt for the Composition Scheme by filing Form GST CMP-02 before the beginning of the financial year, i.e., on or before 31st March of the preceding year.

[YUWRAJ KOTHARI]

So far first querry is concerned as per Notification 07/2025, to my knowledge no RCM shall apply

AI Summary

Composition dealers must pay 18% GST on rent to unregistered owners under Reverse Charge Mechanism A composition tax dealer inquired about GST obligations regarding rent payments to unregistered owners, mutual fund distributor eligibility for composition scheme, and mid-year scheme switching. One respondent clarified that composition dealers must pay GST under Reverse Charge Mechanism at 18% on business property rent to unregistered owners, with no input tax credit available. Mutual fund distributors were deemed ineligible for composition scheme due to TDS deduction requirements under Section 52 of CGST Act, which disqualifies them per Section 10(2)(d). The respondent confirmed that switching to composition scheme mid-year is prohibited, requiring Form GST CMP-02 filing before March 31st of the preceding year, with turnover limits of ₹1.5 crore for goods or ₹50 lakh for services. Another respondent referenced notification 07/2025 suggesting no RCM applies to the first query.