GST applicability on leased out property for residential purpose

[TEAM GST]

Dear Experts, seeks your valuable insights on the query set out below.

• Mr.A and Mrs.A are co-owners of a property intended to be leased out to Mr.C who is a consultant of BP ventures.
• Now, Mr.A is registered under GST as proprietor of another business, whereas Mrs A is not registered under GST.
• BP ventures is registered under GST.

Now,the Co-owners intent to lease out the property to BP Ventures for residential purpose of Mr.C and his family members.

Should GST be applicable under RCM basis on BP ventures in this scenario, if 'yes', can BP Ventures avail ITC on the same?

Further, would Mr.A's GST registration have any impact on the applicability of GST?

Dear Experts, seeks your valuable insights on the query set out below.

• Mr.A and Mrs.A are co-owners of a property intended to be leased out to Mr.C who is a consultant of BP ventures.
• Now, Mr.A is registered under GST as proprietor of another business, whereas Mrs A is not registered under GST.
• BP ventures is registered under GST.

Now,the Co-owners intent to lease out the property to BP Ventures for residential purpose of Mr.C and his family members.

Should GST be applicable under RCM basis on BP ventures in this scenario, if 'yes', can BP Ventures avail ITC on the same?

Further, would Mr.A's GST registration have any impact on the applicability of GST?

[TEAM GST]

Apologies, the query was posted twice by mistake. Regret the inconvenience . Kindly consider the below message as the correct one.

• Mr.A and Mrs.A are co-owners of a property intended to be leased out to Mr.C who is a consultant of BP ventures.
• Now, Mr.A is registered under GST as proprietor of another business, whereas Mrs A is not registered under GST.
• BP ventures is registered under GST.

Now,the Co-owners intent to lease out the property to BP Ventures for residential purpose of Mr.C and his family members.

Should GST be applicable under RCM basis on BP ventures in this scenario, if 'yes', can BP Ventures avail ITC on the same?

Further, would Mr.A's GST registration have any impact on the applicability of GST?

[Sanjeev Agarwal]

Yes. BP Ventures should ordinarily pay GST under RCM, while ITC is a higher-risk issue.

1. RCM applicability

From 18 July 2022, renting of a residential dwelling to a GST-registered person is covered under RCM under Notification No. 05/2022-CT (Rate).

Here:

• Mr. A and Mrs. A are landlords.

• BP Ventures is the contractual lessee and is GST registered.

• Mr. C and his family will occupy the property residentially.

Accordingly, BP Ventures should discharge GST @18% under RCM on the rent.

CBIC Notification 05/2022

2. ITC to BP Ventures

Conservative position: ITC should not be claimed.

Although BP Ventures can argue that accommodation provided to its consultant is a business expenditure under Section 16, Section 17(5)(g) blocks ITC on goods/services used for personal consumption.

Since Mr. C and his family are actually using the property as their residence, an ITC claim carries litigation risk.

The ITC position becomes stronger if BP Ventures can demonstrate that providing accommodation to Mr. C is a contractual/business necessity under the consultancy arrangement.

3. Mr. A's existing GST registration

Mr. A's GST registration for his proprietorship does not change the RCM position.

The RCM notification specifies the supplier as "any person." Therefore:

Landlord	GST status	Treatment
Mr. A	Registered	RCM by BP Ventures
Mrs. A	Unregistered	RCM by BP Ventures

Thus, Mr. A should not charge forward-charge GST merely because he is already GST registered, provided this transaction falls within the residential-dwelling RCM entry.

Recommended position: BP Ventures pays 18% GST under RCM on rent attributable to both co-owners; ITC should conservatively not be claimed unless a strong documented business nexus exists.

[TEAM GST]

In case the lease agreement is between the co-owners and Mr.C , then there will not be any GST impact .right sir?

AI Summary

Residential property leasing to a registered business raises questions on reverse charge liability, input tax credit, and co-owner registration. GST treatment of residential property leasing is queried where co-owners propose to lease property to a GST-registered business for use as the residence of its consultant and family. The issues concern reverse charge liability of the recipient, input tax credit availability, and whether one co-owner's GST registration through a separate proprietorship affects GST applicability to the lease. The query highlights the residential purpose of the premises and the differing GST registration status of the co-owners.