2023 (3) TMI 622 - AAR - GST

Levy of GST - Forward Charge Mechanism (FCM) or Reverse Charge Mechanism - Service Received by a registered person by way of renting of residential premises used as guest house of the registered person - HELD THAT - It is clear that GST will be applicable even if the residential property is rented out to a registered person w.e.f. 18th July 2022. Liability to pay GST @ 18% under the reverse charge mechanism will arise on the recipient (tenant), if he is a registered person under GST with no other condition. Further, It may be noted that type or nature/purpose of use of residential dwelling i.e. for residence or otherwise by the recipient, has not been a condition in the said RCM notification. Hence, service of renting of residential dwelling to a registered person, would attract RCM irrespective of the nature of use. A residential property given on rent to a registered person whether for residential purpose or otherwise shall attract RCM provisions. At the outset it is pertinent to understand whether in this case, the property on rent is a residential property or not and what shall be the GST implication if the same is being used as guest house by the Applicant? In the instant case, the Applicant has stated that it has taken on rent certain premises at New Delhi and Jajpur in Odisha, for use as guest house. The guest house is used to provide food and accommodation for the employees of the company. From the written submission made, contentions advanced by the representatives of the Applicant company and rent agreement copies furnished, the nature of rented properties under discussion clearly appear to be residential properties used for commercial purpose. Thus, it may be concluded that irrespective of the purpose of use, if the residential dwelling is rented to a registered person under GST, the tenant has to discharge the GST liability under RCM as per Notification No. 05/2022 Central Tax (Rate) dated 13th July 2022.

Summary

Issues involved:
Whether service received by a registered person by renting residential premises used as a guest house is subject to GST under Forward Charge Mechanism (FCM) or Reverse Charge Mechanism (RCM)?

Analysis:

Issue 1: Applicability of GST on renting residential premises for a guest house

The applicant sought an advance ruling on whether renting residential premises for use as a guest house by a registered person attracts GST under FCM or RCM. The applicant provided details of renting properties in New Delhi and Jajpur for employee accommodation. The Central Board of Indirect Taxes and Customs defined "residential dwelling" as any residential accommodation excluding places like hotels or guest houses. The applicant highlighted amendments in notifications making services to registered persons taxable under RCM. The GST Council decision in June 2022 brought renting of residential dwellings under the tax net, with RCM applicable to services provided to registered persons.

Issue 2: Interpretation of Notification No. 05/2022-Central Tax (Rate)

The CBIC notification dated July 13, 2022, specified that renting residential dwellings to registered persons attracts GST under RCM. The notification clarified that the nature of use of the property by the recipient does not affect the RCM applicability. The notification outlined the tax implications for different scenarios, emphasizing that residential properties rented to registered persons are subject to RCM, regardless of the purpose of use. The ruling concluded that services received by the applicant for renting residential premises as a guest house are subject to GST under RCM as per Notification No. 05/2022-Central Tax (Rate).

Conclusion:
The ruling confirmed that services received by a registered person for renting residential premises as a guest house are subject to GST under RCM. The applicant or jurisdictional officer can appeal to the Odisha State Appellate Authority for advance ruling within 30 days if aggrieved by the decision.