GST RCM on renting of commercial property for FY 2023-24-brought under "as is where is basis"!

The 55th GST Council meeting has introduced a key amendment to the Goods and Services Tax (GST) regime, specifically targeting the reverse charge mechanism (RCM) on the renting of commercial or immovable property. Under the proposed amendment, taxpayers registered under the composition levy scheme will now be excluded from the entry at Sr. No. 5AB, which was originally introduced by Notification No. 09/2024-CTR on October 8, 2024. 

Let's understand the details!

Proposed amendment

To exclude taxpayers registered under the composition levy scheme from the entry at Sr. No. 5AB introduced vide Notification No. 09/2024-CTR dated 08.10.2024 vide which renting of any commercial/ immovable property (other than a residential dwelling) by unregistered person to registered person was brought under reverse charge mechanism. Further, to regularize the period from the date when notification No. 09/2024-CTR dated 08.10.2024, became effective i.e. from 10.10.2024 till the date of issuance of the proposed notification on “as is where is” basis.

Key highlights

• Notification No. 09/2024-Central Tax (Rate) dated 08.10.2024, brought the renting of commercial or immovable property by an unregistered person to a registered person under the reverse charge mechanism (RCM).
• The proposed changes aim to exclude taxpayers registered under the composition levy scheme from the provisions of Sr. No. 5AB of the notification, which will alleviate compliance challenges for these taxpayers.
• The proposed notification seeks to regularize the period from the notification’s effective date (10.10.2024) until the issuance of the upcoming changes on an “as is where is” basis. This means that the taxpayers registered under the composition levy who have already paid taxes under RCM as per clause 5AB will not get refund of such tax paid.

Conclusion

The recent updates introduced by Notification No. 09/2024-CTR and the proposed changes regarding the reverse charge mechanism (RCM) for renting commercial or immovable property offer a significant shift in GST compliance for both landlords and tenants. The exclusion of taxpayers under the composition levy scheme from the reverse charge mechanism aims to streamline compliance for small businesses and reduce administrative burdens. Moreover, the regularization of the transition period ensures that these changes are applied fairly and consistently. 

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