RCM on rental services received for business by a registered person from an unregistered person

[KALLESHAMURTHY MURTHY K.N.]

Dear Sirs, 

A is a petty gross dealer registered himself under GST voluntarily, though not crossing the threshold limit of Rs. 40 lakhs and is filing returns quarterly for nil turnovers.  The shop is rented on a monthly basis, owned by a land lord not registered.

As per Notification 9/2024 dated 8-10-2024, amended to Notification 13/2017 dated 28-06-2017 by insertion of Sec. 5AB provides for paying tax under RCM by a registered person for receiving rental services from an unregistered person.

Whether “A” in the circumstance of not crossing the threshold limit but registered, is liable to tax under RCM?

[KASTURI SETHI]

Sh.Kalleshamurthy Murthy Ji,

Sir,           

Answer is YES.

Once registered with GST department, tax has to be paid even if turnover is less than 40 lahs/20 lakhs. 

As per Section 9 (3) exemption is not applicable, if tax is to be paid under RCM. Compulsory registration under Section 24 (iii)

[Sadanand Bulbule]

Breif and befitting answer by Sirji. I go with him.

[Ganeshan Kalyani]

Yes, once registered under GST, the law of RCM applies. You are suppose to pay GST under RCM. Also, note you are eligible to take credit if your outward supply is taxable.

[KALLESHAMURTHY MURTHY K.N.]

Sir, 

Whether GST paid under RCM is not available where there is no liability to output tax on supplies. 

[Shilpi Jain]

In this case, the moment you are registered under GST, irrespective of whether you have crossed threshold or not there is GST liability on your supplies. So this person will also have to check whether the GST on his sales, not paying GST, could be a violation.

RCM liability also attracts.

Could consider finishing compliances of paying applicable GST on output and input supplies and apply for cancellation of registration to avoid tax liabilities for future transactions.

AI Summary

Reverse charge on rental services: registered recipients must pay GST under RCM even if below threshold, with input credit rules applying. Reverse charge liability arises on rental services received by a registered person from an unregistered supplier; a voluntarily registered person below the turnover threshold must pay tax under the reverse charge mechanism, the exemption does not remove that obligation, and where outward supplies are taxable the recipient may claim input tax credit-otherwise the registrant should regularise compliance or consider cancellation.