Analyses of RCM Liability on Renting of Any Property by unregistered person to registered person

Summary

The video discusses the significant changes in GST regulations effective October 10, 2024, as outlined in Notification No. 9/2024. It specifies that any property, except residential dwellings, rented from unregistered to registered persons will now be subject to reverse charge liability. This amendment broadens the scope from just commercial properties. The speaker highlights important considerations regarding the applicability of reverse charge, particularly for registered recipients engaged in supply activities. Additionally, the time of supply provisions for GST payment and invoicing requirements are clarified, encouraging viewers to stay informed about further developments.

Takeaways

• 📅 Effective from October 10, 2024, the reverse charge mechanism (RCM) applies to letting out any property, other than residential dwellings, by unregistered persons to registered persons.
• 🔍 Notification number 9 of 2024 amends the reverse charge service rate notification 13 of 2017 under the CGST Act.
• 🏢 The notification's wording implies a broader definition of 'property' beyond just commercial properties, which may lead to different interpretations.
• 💼 Registered recipients must discharge the GST liability when renting non-residential properties from unregistered persons.
• 📝 The reverse charge is already applicable to residential dwellings let out by unregistered persons since July 18, 2022.
• ⏳ Time of supply for the reverse charge is the earliest of either the payment date or the invoice issuance date.
• 📜 Recipients must issue self-invoices to themselves under Section 31(3)(CL)(F) to document the transaction for GST credit purposes.
• ✅ The reverse charge liability must be settled to avail input tax credit as per Rule 36(1)(b).
• 👥 The changes are based on recommendations from the 54th GST Council meeting, aiming to streamline GST compliance.
• 🔄 Stay tuned for more updates and videos discussing subsequent changes in the GST framework.

Q & A

What is the primary change announced in the notification 9 O 2024?

The notification states that any service involving the letting out of property other than residential dwellings by unregistered persons to registered persons is now subject to reverse charge liability, effective from October 10, 2024.

How does this notification affect commercial properties?

While the 54th GST Council meeting recommended that commercial properties let out by unregistered persons to registered persons would be subject to reverse charge, the notification's wording suggests it applies to any property other than residential dwellings, thus broadening its scope.

What is the significance of reverse charge mechanism (RCM) in this context?

Under the reverse charge mechanism, the registered recipient is responsible for discharging the GST liability on services received from an unregistered supplier, which is a shift from the traditional model where the supplier is liable.

What is required from the registered recipient to avail GST credit?

The registered recipient must issue a self-invoice and ensure payment of the reverse charge liability to avail GST credit, as per rule 36 sub-rule 1, Clause B.

When does the time of supply occur for these services?

The time of supply is determined by the earliest of either the date of payment made by the registered recipient or the date of issuance of the invoice.

What implications does the notification have for residential dwellings?

Residential dwellings were already subject to reverse charge when let out by unregistered persons to registered persons, with this provision being effective since July 18, 2022, and remains unchanged by the new notification.

What is the broader context behind the amendment to the reverse charge service rate notification?

The amendment reflects ongoing changes to GST policy aimed at ensuring compliance and accountability in the real estate rental sector, as emphasized by the recommendations from the GST Council.

What should recipients verify when engaging in property rental agreements?

Recipients should verify whether the property being rented is residential or non-residential, as this determines the applicability of the reverse charge mechanism.

Why is it essential to stay updated with these notifications?

Staying updated with notifications is crucial for registered persons to ensure compliance with GST regulations and to avoid any penalties associated with non-compliance.

How does this change impact TDS deductors who are also registered in GST?

TDS deductors registered in GST who rent property from unregistered persons must now assess the reverse charge applicability based on the nature of the property rented, which is now subject to the new provisions.