The Odisha Authority for Advance Ruling has recently ruled that service received by a registered person by way of renting of residential premises used as a guest house of the registered person is subject to Goods and Services Tax (GST) under Reverse Charge Mechanism (RCM).
The Applicant, M/s. Indian Metals and Ferro Alloys Limited had sought for an advance ruling in respect whether service received by a registered person by way of renting of residential premises used as a guest house is subject to Forward Charge Mechanism (FCM) or Reverse Charge Mechanism (RCM).
The Applicant stated that the term “Residential Dwelling” is not defined anywhere in the Goods and Services Tax Act or in the earlier Service Tax regime. However, Central Board of Indirect Taxes and Customs (CBIC) in its education guide dated 20.06.2012 has explained the phrase “residential dwelling” in clause 4.13.1 by interpreting the term in normal trade parlance as any residential accommodation, but does not include hotel, motel, inn, guest house, camp – site, lodge, houseboat, or like places meant for temporary stay.
The Applicant through its representatives Rabindra Kumar Sahoo, Sr GM Taxation & A K Sahoo, Manager Taxation re-iterated the submissions already furnished in the application for advance ruling. In the course of hearing, they also submitted copies of the rent agreement made between the service provider (house owner) & service receiver (the Applicant in this case) for reference of the members.
The Authority Bench observed that “the renting of an immovable property / residential dwelling is considered a supply of service under GST as per schedule 11 of the CGST Act 2017. Till 17th July 2022, services by way of renting of residential dwelling for use as residence was exempted, whereas services by way of renting for commercial use (SAC Code —997212) was taxable at 18% of residential property under GST has changed w.e.f 18.07.2022.”
It was further observed by the CGST Member G K Pati and SGST Member P K Mohanty that the decision to bring the renting of residential dwellings under the tax net was taken in the 47th GST Council Meeting held in June 2022 by partially removing the exemption and including the same under RCM services when provided to a registered person.
It was thus ruled that, wherein the Applicant (Registered person) has received the service by way of taking residential premises on rent for use as its guest house, it is observed that the said service received by the Applicant (Registered person) is subject to GST under Reverse Charge Mechanism in view of the Notification No. 05/2022- Central Tax (Rate) dated 1 July, 2022.
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