GST on Rent on Commercial Property

Reverse Charge Mechanism (RCM) means that instead of the seller (supplier) paying GST to the government, the buyer (recipient) is responsible for paying it.

For Eg:

You run a business and need goods delivered. You hire a Goods Transport Agency (GTA) to transport them.

Normally:

The GTA would charge you ₹1,000 for transportation + 18% GST = ₹1,180.The GTA would then pay the ₹180 GST to the government.

Under RCM:

Instead of the GTA paying GST:

• The GTA charges you only ₹1,000 (no GST).

• You, as the recipient, calculate and pay 18% GST (₹180) directly to the government.

• You can later claim this ₹180 as Input Tax Credit if the transportation is for business purposes.

In simple terms, under Rverse Charge Mechanism (RCM), you deposit GST with Government on one hand and claim the same as Input Tax Credit (ITC) on the other.

RCM on Commercial Rent

Central Board of Indirect Taxes and Customs (CBIC) via Notification No. 09/2024 have enhanced the complaince with regards to GST on Commercial Rent paid by Registered Businesses.

Summary on RCM Applicability:

Tenant's GST Status	Landlord's GST Status	GST Applicability	Who Pays GST?
Not Registered	Not Registered	Not Applicable	None
Not Registered	Registered	18% Forward Charge	Landlord
Registered	Registered	18% Forward Charge	Landlord
Registered	Not Registered	18% Reverse Charge	Tenant

As per above summary, RCM on Rent is only applicable in cases where Tenant is Registered under GST and Landlord is not registered.

The above notification issued by CBIC is appliable from 10th October, 2024.

Any queries related to above can be asked in the comments below.