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Cus - Export of non-basmati rice - Notification 20/2023 insofar as it denies the benefit of the transitional arrangement as contained in para-1.05 of the FTP 2023, is bad in law: HCCus - Refund of SAD - 102/2007-Cus - Areca Nut and Supari are one and the same - Objections with regard to name, nature and status of importer or buyers or the end use of goods purchased by them etc. are extraneous: HCCX - Interest on Refund - Since wrong order annexed by petitioner in paper book, Bench is unable to proceed further - Petition is dismissed with liberty to file a fresh one: HCGST - No E-way bill - When petitioner imports machinery and after Customs clearance, transports same to his own factory, it cannot be said that such a transportation would fall within the definition of term 'supply' - Penalty imposable under second limb of s.129(1)(a): HCGST - Fix responsibility on officers who allowed BG to lapse - Petitioner not justified in not renewing BG - Cost of Rs.15 lacs imposed, to be paid to PM Cares Fund: HCGST - Since the parties agree that petition can be disposed of on the basis of records available before Appellate Authority, petitioner is directed to enclose all documents filed before Appellate Authority in a compilation, in form of a paper book: HCWrong RoadST - Whether any service is used for personal consumption or not is certainly question of fact and being question of fact, no substantial question of law arises: HCGovt proposes to amend Geographical Indication of Goods Rules; Draft issued for feedbackST - If what has been paid as tax is without authority of law, Revenue should refund the same - Denial of credit would result in the whole exercise being tax neutral: HCWarehousing Authority notifies several agri goods to be stored in only registered warehousesST - Even if the petitioner may have a case on merits, it is best left to be decided by the Appellate Authority under the hierarchy prescribed under the FA, 1994: HCUS FDA okays Eli Lilly Alzheimer’s drugGST - Petitioner challenges jurisdiction of assessing officer - Petitioner is entitled to file an appeal u/s 107 by availing an alternate efficacious remedy: HCFive from Telangana killed in car accident on Pune-Solapur HighwayGST - Existence of an alternative remedy is a material consideration but not a bar to the exercise of jurisdiction: HCHush money case against Donald Trump - Sentencing deferred to Sept 18GST - It is open to a trader to take goods by whichever route he opts, unless the law otherwise requires, destination point being intact: HCDeadly hurricane Beryl smashes properties in JamaicaGST - Conclusion that taxable person is providing a service to supplier while taking the benefit of a discount by facilitating an increase in the volume of sales of such supplier is ex facie erroneous and contrary to the fundamental tenets of GST law: HCIsrael claims 900 militants killed in Rafah since May monthGST - Order expressly records that personal hearing notice was returned with endorsement 'no such person at address' - Since petitioner has shifted to a new premises, it is just and necessary to provide an opportunity to contest demand: HC116 die in stampede at UP ’Satsang’I-T- Application for revision of order dismissed in limine on grounds of delay; case remanded for re-consideration: HCWe are deepening economic ties with India, says US officialI-T- As per Section 119(2)(b), power to condone applications relate to claims for amount exceeding Rs 50 lakhs are to be considered by CBDT; however it is impermissible for CBDT to pass order on merits: HC8 Dutch engineers build world’s longest bicycle - 180 feet, 11 inchesI-T- Additions framed u/s 68 for unexplained income & u/s 69 for unexplained expenditure not tenable where complete transactional details are furnished & not doubted: HCRailways earns Rs 14798 Crore from Freight loading in June monthI-T- Delay in filing ITR is per se insufficient reason to estimate assessee's profit @15% on turnover, more so where audited financial report is filed in timely manner: ITATMoD inks MoU to set up testing facilities in Unmanned Aerial System in TN Defence Industrial CorridorI-T- For invoking section 69A, assessee should be found to be owner of any money, bullion, jewellery or other valuable article & which is not recorded in the books of account: ITATGovt proposes Guidelines for ethical approach to Coal MiningI-T- TDS credit can be allowed based on AIS, where details pertaining to TDS, advance tax & other payments are reflected in Form 26AS: ITATVaishnaw to inaugurate Global IndiaAI Summit 2024I-T- Lending money with the primary intention of earning interest can be considered a business activity, but nature and manner of lending, as well as the frequency, should be taken into account: ITAT
 
Renting of residential dwelling - withdrawal of exemption - a fiasco?

AUGUST 13, 2022

By CA Aumkar Surendra Prachi Gadgil, MCom, FCA

IN the 47th GST Council meeting held on 29th June 2022, inter alia , the following recommendation was made -

C4. In case of Services, following exemptions are being rationalized:

 

 

Sr. no. Description
2.

Exemption on following services is being withdrawn.

a. x xx

b. x xx

c. x xx

d. x xx

e. x xx

f. Renting of residential dwelling to business entities (registered persons).

For effectuating the above proposal, amendments were made in notification 12/2017-CTR [granting exemption] and in notification 13/2017-CTR [reverse charge liability] by notifications 04/2022-CTR and 05/2022-CTR respectively. Both these notifications are dated 13th July 2022 and made effective from 18th July 2022.

The relevant entries of these respective notifications read -

12 Heading 9963 or Heading 9972 Services by way of renting of residential dwelling for use as residence [except where the residential dwelling is rented to a registered person]. Nil Nil

 

5AA Service by way of renting of residential dwelling to a registered person. Any person Any registered person.

Instead of entering into a complex word jargon, the sum and substance of these amendments is lucidly explained in the tabulation below -

Sr No Residential dwelling let out for - Registration status of Owner of House property Registration status of Tenant of house property GST applicability and Person liable to pay GST
1 Residential usage Not registered under GST Not registered under GST No GST payable - exempted as per notification 4/2022 CTR
2 Residential usage Not registered under GST Registered under GST Taxable. Recipient to pay GST under reverse charge mechanism. Sr.5AA of 5/2022-CTR applies.
3 Residential usage Registered under GST Not Registered under GST No GST payable - exempted as per notification 4/2022 CTR
4 Residential usage Registered under GST Registered under GST Taxable. Recipient to pay GST under reverse charge mechanism. Sr.5AA of 5/2022-CTR applies.
5 For commercial usage Registered under GST Not registered under GST Taxable. Property owner would be required to pay GST under forward charge mechanism.
6 For commercial usage Registered under GST Registered under GST Taxable. Recipient to pay GST under reverse charge. Sr.5AA of 5/2022-CTR applies.

Some pertinent questions arise in the above context, which I have tried to answer below.

1. What about the Input tax credit, if tax is being paid under reverse charge mechanism?

If the renting is for residential dwelling, then the input tax credit would be blocked under provisions of section 17(5) of the CGST Act 2017. However, if the residential dwelling is taken on rent for commercial usage, then Input tax credit would be available as the residential dwelling would constitute a ‘place of business'.

2. What should the taxpayer do in order to ensure compliance under the GST laws?

The recipient (registered person)needs to start paying GST under reverse charge mechanism. Since the notification is effective from 18/07/2022, GST would be due on rent accruing from such date.

One nagging question is - whether the ‘registered person' should hold registration in the state/UT where such residential property is located?

As per Section 2(94) of the Act, 2017, ‘registered person' means a person who is registered under section 25.

The notification(s)does not qualify the word "registered". Therefore, if any recipient holds a registration under GST Laws anywhere in India and has taken a ‘residential dwelling' on rent, then the recipient would be required to pay GST under reverse charge basis, in that state where such ‘residential dwelling' is located. For this purpose, a fresh registration in that State would be required. This is because as per provisions of section 12(3) of the IGST Act 2017, the ‘Place of supply' in case of services in relation to immovable property will be the ‘location of such immovable property'.

Let us also take a look at the following examples:

Illustration no. 1.

X Ltd holds a Maharashtra GST registration. Itplans a new set up in the state of ‘Goa' and for this purpose sends a team to do the ground work. X Ltd has taken two flats of the same owner [unregistered] on rent for use as residence by their team members. The total yearly rent for the flats is Rs 18 Lakhs. X Ltd is of the view that since it does not hold a registration in ‘Goa' they shall be considered as ‘not registered under GST' and consequently no tax is required to be paid under reverse charge mechanism. Is this claim correct?

Answer.

This claim of X Ltd. is incorrect. Entry 5AA refers to ‘any registered person' as recipient. This qualification of being registered is not vis-à-vis registered in Goa but anywhere in India under the GST laws. Therefore, X Ltd. would be required to pay GST under reverse charge mechanism by seeking a fresh registration in Goa for purpose of discharging tax. This is apparently so because there is also no mechanism under the GST law or GSTN portal which enables a person registered in one state to deposit the tax of another state under reverse charge.

Illustration no. 2.

The recipient of ‘renting of a residential dwelling for use as a residence' is a proprietor of a business and holds a GST registration based on his PAN. What is his tax liability?

Answer. The proprietor would be taking an unfortunate ‘hit' of the tax liable to be paid under reverse charge mechanism. He would also not be entitled to claim the Input tax credit in view of the provisions of s.17(5) of the Act.

Stop Press: The PIB in a tweet release yesterday evening said this -

Conclusion: It would be prudent on the part of the CBIC to clarify on both these aspects before the issue snowballs into a major controversy.

 

[The views expressed are strictly personal.]

(DISCLAIMER : The views expressed are strictly of the author and Taxindiaonline.com doesn't necessarily subscribe to the same. Taxindiaonline.com Pvt. Ltd. is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in the articles being hosted on the site)

 RECENT DISCUSSION(S) POST YOUR COMMENTS
   
 
Sub: residential property for use as residence

exmption entry was for renting service of residential property being used as residence and is made taxable under rcm with effect from 18 july if by provided to gst registerd person.
in other words even if use is residential the liability is there merely because the receiver is gst registered, the catcheble person
even after the amendment there is no change in the purpose of use. then why it is written in article that if used for commercial purpose then such such scenario. its leading to absured interpretation.
to my mind its intention to take tax and give credit also since receiver normally being the companies or coporates using it in the course and furthurance of business only. so far as the case of individual is concerned he will also get the credit if he can prove that he runs the business from there or its necessary for him to stay there to run the business or to grow the same

Posted by Navin Khandelwal
 

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