[Opinion] Exclusion of Composition Dealers from Reverse Charge Mechanism (RCM) on Renting of Commercial Property

R. Muthukumaran – [2024] 169 taxmann.com 717 (Article)

1. Introduction

The GST Council, in its 55th meeting held on December 21, 2024, introduced a crucial clarification regarding the applicability of the Reverse Charge Mechanism (RCM) to taxpayers under the composition levy scheme. This measure exempts composition taxpayers from the RCM obligations imposed under Notification No. 09/2024-Central Tax (Rate), providing much-needed relief and simplicity.

2. Background

Notification No. 09/2024-Central Tax (Rate), effective October 10, 2024, brought renting of commercial property by unregistered persons to registered persons under the RCM ambit. This posed compliance challenges for composition taxpayers, who are small-scale businesses or professionals with limited resources. Recognizing these difficulties, the GST Council has now excluded composition taxpayers from these RCM provisions.

3. Key Recommendations of the 55th GST Council Meeting

1. Exemption for Composition Taxpayers: Taxpayers registered under the composition levy scheme are now excluded from the RCM obligations for renting commercial or immovable properties.
2. Regularization of Past Period: Transactions from October 10, 2024 (effective date of Notification No. 09/2024), to the date of issuance of the revised notification will be regularized on an “as-is-where-is” basis. This ensures no penalties for non-compliance during the interim period.

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