New GST on Rental Expense under Reverse Charge🚨 Latest GST Update and a Comprehensive Understanding

Who’s Responsible for Paying GST on Your Property:
Landowner or Tenant?
Forward charge or Reverse charge?
Residential or Commercial?

A crucial update has arrived, effective October 10, 2024, and it’s important for all tenants to be aware of these changes. If your landlord is unregistered for GST and you are a registered tenant of other than residential property, the responsibility for paying GST now falls on you under the reverse charge mechanism.

Here’s how it works for a tenant (businesses having rental expense)👇🏼

🏢 Commercial Properties (any property other than residential dwelling):

If your landlord is unregistered under GST, you being tenant must pay the GST under reverse charge (RCM). Conversely, if the landlord is registered, landowner should pay the tax under forward charge mechanism, irrespective of tenant being GST registered or not. Introduced vide Notification No. 09/2024- Central Tax (Rate), dated 8th October, 2024 w.e.f 10th October, 2024

🏠 Residential Dwelling:

Generally, residential rent is EXEMPT FROM GST. However, if it is let out to registered person (sole proprietor for business purposes), registered tenant will be required to pay the GST under the reverse charge mechanism RCM. Introduced vide Notification No. 05/2022 Central Tax (Rate) dated 13th July 2022 effective 18th July 2022.

Given these changes, it’s crucial to review your rental income / expenses vis-a-vis agreements carefully and prepare for your October returns, which are due in November.

Stay informed and proactive about your GST compliance changes!

#GSTwithSaradha

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