Major amendments in RCM-related supplies under GST: With effect from July 18th, 2022, There are the following additions/changes in RCM-related supplies under GST. Effective 18.07.2022, exemption under GST on the service of renting of residential dwelling for use as a residence shall be restricted where the recipient of such service is not registered under GST.

Supply of services by GTA: If the following conditions have been satisfied then there is no requirement to pay GST under RCM by the recipient in case of transportation of goods:

    • The supplier has taken registration under the CGST Act, 2017 and exercised the option to pay tax on the services of GTA in relation to transport of goods supplied by him under forward charge; and
    • The supplier has issued a tax invoice to the recipient charging Central Tax at the applicable rates and has made a declaration as prescribed in Annexure III on such invoice issued by him.

Renting of residential dwelling: – If Services by way of renting of a residential dwelling are provided by any person to a registered person then in that case GST will be applicable and the same will need to be paid under RCM by the recipient.

Where the recipient of such service is registered under GST, the service shall be liable to GST @ 18%. However, the tax shall be paid by the recipient under reverse charge. The enclosed table summarises the position.

Implications for the recipient:

Businesses that have taken residential dwellings on rent for use as guesthouses or as the residence of their personnel will be in a position to claim the ITC of the GST paid under reverse charge, this being a business expenditure and no blockage of ITC u/s 17(5) for the same (yet).

Registered individuals staying in rented houses must bear an additional 18% cost.

Implications for the supplier.

For the suppliers (lessors) who are already registered under GST, nothing changes. Provisions relating to apportionment of ITC u/s 17(2) also remain the same since outward supplies liable to tax under RCM are akin to exempt supplies for the said purpose.

Suppliers (lessors) who are not registered and were not otherwise required to get registered under GST should continue to remain unregistered (ideally). But a close reading of Notification No. 5/2017-CT dated 19.06.2017 would reveal that only such persons who are only engaged in making supplies of taxable services, the total tax on which is liable to be paid on a reverse charge basis by the recipient u/s 9(3) have been notified as the category of persons exempted from taking registration.

Also check: TDS on Virtual Digital Asset | Section 194S

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