GST on Renting of Immovable property, When under FCM and when RCM apply? a new change
In the recent 54th GST Council meeting, a significant change was proposed concerning the taxation mechanism for renting of commercial properties. Under the existing GST framework, when an unregistered person rents out a commercial property to a registered person, the Forward Charge Mechanism (FCM) generally applies. However, with the proposed amendment, this transaction will now be subject to the Reverse Charge Mechanism (RCM). This shift in tax liability represents a key update aimed at simplifying compliance and ensuring tax collection at the recipient’s end, further reinforcing accountability for registered entities.
Below is table to summarise GST on Rent after change announced by 54th GST council meeting
| Property Type | Service Supplier | Recipient Type | Tax Mechanism | Notes |
|---|---|---|---|---|
| Commercial | Registered Person | Registered Person | FCM | |
| Registered Person | Unregistered Person | FCM | ||
| Unregistered Person | Registered Person | RCM | Proposed in 54th GST council meeting (Notification coming soon to notify the applicable date) | |
| Unregistered Person | Unregistered Person | Exempt | ||
| Residential | Registered Person | Registered Person | Exempt | |
| Registered Person | Unregistered Person | Exempt | ||
| Unregistered Person | Registered Person (Proprietor) | Exempt* | Exempt if renting for own residence, as per Notification No. 15/2022 w.e.f. 1-1-2023. | |
| Unregistered Person | Registered Person (Director/Employee) | RCM |
Explanation (as per Notification No. 15/2022-Central Tax (Rate), w.e.f. 1-1-2023):
- Renting of residential dwelling to a registered person is exempt if:
- The registered person is a proprietor renting in his personal capacity for use as his own residence.
- Renting is on his own account and not for the proprietorship concern.
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