Commercial property rentals now under Reverse Charge Mechanism: GST Council

The GST Council in India recently made a significant change regarding the taxation of commercial property rentals by bringing them under the Reverse Charge Mechanism (RCM). This means that instead of the supplier (the landlord) being responsible for collecting and depositing the GST, the liability now falls on the recipient (the tenant) to pay the GST directly to the government. Here are the key points about this change: Applicable Situations: The RCM will apply when the commercial property is rented out by a person not registered under GST to a person who is registered. Impact on Tenants: Registered businesses renting commercial properties will now need to ensure they comply with the RCM provisions by calculating and paying GST on the rent directly to the government. They can also claim an input tax credit for the GST paid under RCM. Landlords: Landlords who are not registered under GST will not be responsible for collecting GST on rentals, shifting the compliance burden entirely to the tenants. Compliance: Tenants will need to be vigilant about maintaining accurate records and ensuring timely payment of GST under RCM, as non-compliance can result in penalties. This change aims to streamline tax administration and reduce the burden of tax collection on smaller landlords, while ensuring that the GST revenue is collected from registered entities who are better equipped to handle the compliance requirements.

 

KL Gupta