RCM is applicable on renting of commercial property by unregistered persons w.e.f. 10.10.2024!

As of October 10, 2024, the concept of Reverse Charge Mechanism (RCM) has been extended to the renting of commercial property by unregistered persons under the GST framework. This significant update aims to streamline tax compliance and ensure that even unregistered property owners contribute to the GST system when renting out commercial spaces

Let’s understand the notification!

Notification No. 09/2024 - Central Tax (Rate) dated 08^th October, 2024

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

Date: 08.10.2024

‍

Notification No. 09/2024 - Central Tax (Rate)

G.S.R. 623(E).- In exercise of the powers conferred by sub-section (3) of section 9 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby makes the following further amendments in the notification of the Government of India, in the Ministry of Finance (Department of Revenue), number 13/2017-Central Tax (Rate), dated the 28th June 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 692(E), dated the 28th June 2017, namely:-

1. 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: -

‍

2. This notification shall come into force with effect from the 10th day of October 2024.

[F. No. 190354/149/2024-TO(TRU-II) - Part-I CBEC]

DILMIL SINGH SOACH, Under Secy.

Key highlights of the notification

1. New RCM Provision: Effective from October 10, 2024, the Reverse Charge Mechanism (RCM) will be applicable to the renting of property other than residential dwelling i.e. commercial property by unregistered persons to registered persons under GST.
2. Unregistered Property Owners: Property owners who are not registered under GST but rent out commercial properties will now fall under the RCM framework.
3. Tenant's Responsibility: Tenants renting commercial property from unregistered landlords will be required to pay GST under the RCM mechanism.
4. GST Rate Remains the Same: The existing GST rate for renting commercial properties (typically 18%) will continue to apply.
5. Objective of the Change: This move aims to enhance GST compliance, especially ensuring that unregistered property owners contribute to the tax system.
6. Impact on Businesses: Tenants must stay alert to the new tax obligations and adjust their accounting and GST filings accordingly.

Conclusion

In conclusion, the extension of the Reverse Charge Mechanism (RCM) to the renting of commercial property by unregistered persons marks a significant shift in GST compliance. With effect from October 10, 2024, tenants will be responsible for paying GST when renting from unregistered property owners, ensuring greater tax inclusion and improved revenue collection. While this change brings about a new set of responsibilities for businesses, it also encourages transparency and equal tax treatment across the commercial real estate sector. Tenants and property owners alike must adapt to these new provisions by staying informed and ensuring proper compliance to avoid any potential pitfalls. 

‍