[Opinion] RCM on Residential as Well as Commercial Properties Taken on Rent
- Blog|News|GST & Customs|
- 2 Min Read
- By Taxmann
- |
- Last Updated on 17 January, 2025
CA Arun Soni & Keshav Khandelwal – [2025] 170 taxmann.com 369 (Article)
1. Introduction: Decoding GST on Rentals
To conduct any business activity a person requires to have a place where he sits and does the business activity, at least. Such property can be owned or rented, as the case may be. If the property is owned that’s great but if the property in which you are running the business is taken on rent, that brings the challenges. In this article we will delve into the most confusing entries of RCM notification 13/2017-CTR dated 28.06.2017 related to applicability of RCM on Renting of Residential Property (Entry no. 5AA inserted on 18.07.2022) and Commercial Property (Entry No. 5AB inserted on 08.10.2024).
2. Status of Property vs. Usage of Property
It all started with status of the property given on rent.
- Residential Property given on Rent
- Commercial Property given on Rent
Apparently, if we think of status of property, we believe that the usage is as per the status i.e. residential property is used for Residence and commercial property is used for business.
Therefore, Residential Property given on Rent which is used for residential purpose, has no GST implications as per entry no. 12 of N/N 12/2017-CTR dated 28.06.2017 which, before 18.07.2022 said that following is exempt-
“Services by way of renting of residential dwelling for use as residence”
Now say I let out my flat to Ms. S, on rent for her residential purpose and collect say, 25 Lacs Rent per year. I am exempt from GST, also Ms. S has not to worry about anything.
Without my knowledge, Ms. S registered herself under GST, gave the address of my flat as her principal place of business for her GST registration and kept on doing some business activity. One fine day, she came to me and said that she no longer wishes to reside in my flat due to some reasons. I, being a genuine believer, didn’t mind and started searching a new tenant.
Before finding a new tenant, the GST authorities found me and came over for some inquiry. The conversation with the GST officials revealed that Ms. S, who looked innocent, committed a fraud of 5 Cr. and ran away.
Ms. S is yet to be found. The authorities could not do any harm to me as I was covered by the above entry.
This resulted in revenue loss to the government and also the government failed in finding Ms. S.
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