Commercial Property Rentals by Unregistered Persons to Registered Person comes under RCM in GST: CBIC notifies [Read Notification]

The Central Board of Indirect Taxes and Customs ( CBIC ) has notified that the renting of commercial property by unregistered persons under Goods and Services Tax ( GST ) to a registered person comes under the Revenue Charge Mechanism ( RCM ) with effect from 10th October 2024.

The GST Council, in its 54th meeting held on September 09, 2024, recommended the RCM for the renting of commercial properties by unregistered persons to registered persons. This recommendation targeted a common loophole that allowed revenue to slip through when unregistered individuals rented commercial spaces to businesses.

On October 08, 2024, the Central Board of Indirect Taxes and Customs (CBIC) issued Notification No. 09/2024-Central Tax (Rate), officially bringing this recommendation into effect.

The notification amends the earlier Notification No. 13/2017-Central Tax (Rate), dated June 28, 2017, which details the items covered under the RCM. Under this mechanism, the liability to pay GST shifts from the supplier to the recipient, ensuring that GST is collected from the registered recipient when the supplier is not registered under GST.

Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here

In this case, the renting of commercial properties by unregistered persons to registered entities will now fall under RCM, meaning the registered recipient of the service will be responsible for paying GST on the transaction.

The notification also states that the amendment will come into effect on October 10, 2024, giving businesses a short window to prepare for compliance with the new rule. This change is not only limited to the Central Goods and Services Tax Act (CGST) but is also mirrored in corresponding notifications under the Integrated Goods and Services Tax Act, 2017 (IGST Act) and the Union Territory Goods and Services Tax Act, 2017 (UTGST Act), ensuring a uniform application across different jurisdictions.

The impact of the RCM on renting property other than residential dwellings under GST depends on the registration status of both the tenant and the property owner. If both the tenant and the owner are unregistered under GST, neither RCM nor the Forward Charge Mechanism ( FCM) applies, meaning no GST is payable. However, if the tenant is unregistered but the owner is registered, GST must be paid by the owner on an FCM basis.

When both the tenant and the owner are registered under GST, the GST liability is again borne by the owner under FCM. However, if the tenant is registered and the owner is unregistered, the liability shifts to the tenant under the RCM, requiring the tenant to pay GST on the rent.

Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here

“In the said notification, in the Table, after serial number 5AA and the entries relating thereto, the following serial number and entries relating thereto in columns (2), (3) and (4) shall be inserted, namely:

“5AB	Service by way of renting of any property other than residential dwelling.	Any unregistered person	Any registered person.”

To Read the full text of the Notification CLICK HERE

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