The recent 54th GST Council meeting has brought significant updates to GST on property rentals, especially for commercial properties. Starting October 1, 2024, tenants renting commercial spaces from unregistered landlords will now be required to pay 18% GST under the Reverse Charge Mechanism (RCM).
Key Highlights:
- 18% GST on Commercial Rentals: Registered tenants will handle GST directly under RCM when renting from unregistered landlords.
- Forward vs. Reverse Charge: Residential properties rented for personal use have no GST implications. However, if used for business purposes (such as by employees or directors), 18% GST under RCM applies.
- Who Pays the GST? In most cases, registered parties renting from registered landlords will pay GST via Forward Charge. RCM applies only when renting from unregistered entities.
Scenarios Explained:
- Both Landlord and Tenant Registered: GST is paid by the tenant to the landlord, who deposits it with the government under the Forward Charge Mechanism (FCM).
- Both Landlord and Tenant Not Registered: No GST liability arises.
- Landlord Registered, Tenant Not: The landlord collects GST from the tenant as per FCM.
- Landlord Not Registered, Tenant Registered: The tenant must pay GST under RCM.
These changes, aimed at preventing tax leakage, will come into full effect on October 1, 2024. Stay informed as more details emerge to ensure compliance with these new rules!