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

Reverse charge on rent: advice conflicted on applicability for composition taxpayers; composition entry rules remain restricted. One advisory view advises that a composition dealer must pay GST under the Reverse Charge Mechanism on rent paid to an unregistered owner and cannot claim input tax credit; another advisory reference cites a notification stating RCM does not apply. Mutual fund distributors are treated as ineligible for the Composition Scheme due to disqualifying receipt/deduction arrangements. Taxpayers cannot opt into composition during the financial year and must file the prescribed form before the year begins, subject to turnover conditions.