Commercial property Gst comes under reverse charge mechanism

The GST Council also decided that commercial property will now come Under the RCM, the liability to pay GST will now shift from the supplier, that is the landlord, to the recipient or the tenant of the commercial rental services.

The Goods and Services Tax (GST) Council decided to bring renting of commercial property by an unregistered person to a registered person under (RCM), in order to prevent revenue leakage.

When Does GST on Commercial Property Fall Under RCM?

1. Renting of Immovable Property by Government or Local Authority: If a commercial property is rented out by a government body or a local authority to a registered person under GST, the recipient (tenant) is liable to pay GST under RCM.
   • Example: If a company rents office space from a municipal body, the company (tenant) will have to pay GST under RCM.
2. Services from Unregistered Suppliers: If a registered person receives commercial rental services from an unregistered person, they may need to pay GST under RCM.
   • Example: If you are renting commercial property from a landlord who is not registered under GST, you as the recipient will need to pay GST under the reverse charge mechanism.

Key Points to Remember:

• Tax Rate: The GST rate on renting of commercial property is generally 18%.
• Input Tax Credit (ITC): If GST is paid under RCM, the recipient can claim Input Tax Credit (ITC), provided the property is used for business purposes.
• Liability to Pay: In RCM, the tenant (recipient) is responsible for calculating and paying the GST directly to the government.

When Does RCM Not Apply?

• If the commercial property is rented by a private entity (not a government body) and both the landlord and tenant are registered under GST, then the forward charge mechanism applies, meaning the landlord (service provider) will collect and pay the GST.