PRECAUTION TO BE TAKEN BY A TENANT BEFORE 𝐑𝐞𝐧𝐭𝐢𝐧𝐠 𝐚 𝐜𝐨𝐦𝐦𝐞𝐫𝐜𝐢𝐚𝐥 𝐩𝐫𝐨𝐩𝐞𝐫𝐭𝐲 𝐟𝐫𝐨𝐦 𝐚𝐧 𝐮𝐧𝐫𝐞𝐠𝐢𝐬𝐭𝐞𝐫𝐞𝐝 𝐥𝐚𝐧𝐝𝐥𝐨𝐫𝐝 UNDER GST ACT

 PRECAUTION TO BE TAKEN BY A TENANT BEFORE 𝐑𝐞𝐧𝐭𝐢𝐧𝐠 𝐚 𝐜𝐨𝐦𝐦𝐞𝐫𝐜𝐢𝐚𝐥 𝐩𝐫𝐨𝐩𝐞𝐫𝐭𝐲 𝐟𝐫𝐨𝐦 𝐚𝐧 𝐮𝐧𝐫𝐞𝐠𝐢𝐬𝐭𝐞𝐫𝐞𝐝 𝐥𝐚𝐧𝐝𝐥𝐨𝐫𝐝 UNDER GST ACT

𝐇𝐞𝐫𝐞’𝐬 𝐰𝐡𝐚𝐭 𝐭𝐡𝐞 𝐫𝐞𝐜𝐞𝐧𝐭 𝐆𝐒𝐓 𝐫𝐮𝐥𝐞 𝐦𝐞𝐚𝐧𝐬 𝐟𝐨𝐫 𝐲𝐨𝐮:

𝓦𝓱𝓪𝓽’𝓼 𝓽𝓱𝓮 𝓡𝓾𝓵𝓮?

Under the Reverse Charge Mechanism (RCM), if you are renting a commercial property and your landlord is not registered under GST, you, as the tenant, are required to pay 18% GST on the rental amount.

This rule shifts the tax liability to the tenant, ensuring compliance even when the landlord does not have a GST registration.

 𝓦𝓱𝓪𝓽’𝓼 𝓽𝓱𝓮 𝓘𝓶𝓹𝓪𝓬𝓽?

Example Calculation:

Monthly Rent: ₹10,000

GST @ 18%: ₹1,800/month

Annual GST Payable: ₹21,600

This can directly impact your working capital, so it’s essential to factor in this cost while managing your finances.

𝐖𝐡𝐨 𝐃𝐨𝐞𝐬 𝐓𝐡𝐢𝐬 𝐀𝐩𝐩𝐥𝐲 𝐓𝐨?

Businesses renting commercial properties from unregistered landlords.

Excludes Composition Dealers: In the latest GST Council meeting, it has been clarified that composition dealers are not subject to this rule. So if you're under the composition scheme, this is a relief for you!

WHAT DOES A COMPOSITION DEALER MEAN UNDER GST ?

Composition Scheme is a simple and easy scheme under GST for taxpayers. Small taxpayers can get rid of tedious GST formalities and pay GST at a fixed rate of turnover. This scheme can be opted by any taxpayer whose turnover is less than Rs. 1.5 crore*

𝑯𝒐𝒘 𝒕𝒐 𝑷𝒓𝒆𝒑𝒂𝒓𝒆?

Ensure proper documentation for rent agreements.

Maintain records of GST payments under RCM.

Claim Input Tax Credit (ITC), if eligible, to reduce your tax burden.

𝐖𝐡𝐲 𝐓𝐡𝐢𝐬 𝐌𝐚𝐭𝐭𝐞𝐫𝐬?

Helps ensure compliance with GST laws.

Avoid penalties and interest on late GST payments.

Smoothens your financial planning by accounting for these additional tax obligations.

Courtesy :  SHRI CA. Praveen Sharma

R V Seckar FCS, LLB

79047 19295

rvsekar2007@gmail.com