All about GST on RENTING of Immovable Property

[K Balasubramanian]

1. Introduction: Like any other issues on GST, this issue is equally complex as one need to identify the status of registration of the supplier of service, the service recipient and as to whether the property is residential or commercial for deciding the taxability or otherwise. . This is not the end as residential property, even when let out for residential purposes or commercial purposes also attract GST based on facts, despite the exemptions available for such properties as per notification number 12/2017 (CT RATE) dated 28/06/2017. As there are several amendments to this notification as well as for other notifications on this topic, it is proposed to cover this issue exhaustively to facilitate a person to correctly know the legal position as on date at one place.

2. A big relief is available as per notification number 12/2017 (CT Rate) which provides for exemption from GST on renting of residential property. Serial Number 12 of the said notification provides for such exemption from payment of GST with effect from 01/07/2017 when such services are renting of residential dwelling for use as residence. This position remained till 17/07/2022. Notification Number 04/2022 (CT Rate) dated 13/07/2022 made effective from 18/07/2022 removes such exemption in cases wherever the recipient of service happens to be a registered person.  Implications are that with effect from 18/07/2022, even when a residential dwelling is let out as a residence, when it is used by a registered person GST is applicable. This is by way of RCM and accordingly, the original notification 13/2017 (Central Tax Rate) dated 28/06/2017 which is on RCM was amended by Notification 05/2022 (CT Rate) dated 13/07/2022 and made applicable from 18/07/2022 to provide for GST under RCM when the service is renting of residential dwelling to a registered person when supplier of service may be registered or not but recipient of service happens to be a registered person.

3. While the exemption on residential dwelling used as residence was originally granted with no conditions attached to it, the amendment made effective from 18/07/2022 providing for RCM when such property is let out to a registered person, there was a huge hue and cry from small and medium traders as the proposal was to levy GST even on a non-business activity. Based on several representations, the anomaly was corrected  with effect from 01/01/2023 by way of notification Number 15/2022 (CT Rate) dated 30/12/2022. This amendment is a crucial one on levy of GST on renting of immovable property as this notification provides for relief from GST to limited extent. It may be noted that this exemption is CONDITIONAL and applicable only when the registered person is a proprietor of a proprietorship concern and rents the residential dwelling in his personal capacity for use as his own residence AND such renting is on his own account and not that of the proprietorship concern.

4. Thus, the relief available from 01/01/2023 is not applicable when the service recipient happens to be a partnership firm or corporate entity as this notification is applicable only for proprietorship concerns and also only when used for non-business purposes. Accordingly, even a residential dwelling unit, when used as a GUEST HOUSE by the recipient of service,  is hit by 13/2017 and RCM is applicable.

5. It may be noted that services by way of renting of any immovable property, other than residential dwelling, when let out by a registered person is subject to GST under Forward Charge. This is very clear from the language of the notification 12/2017 which is applicable only for residential dwelling for residence. To make the existing complications more complex, as it happens in several cases, Notification Number 09/2024 (CT Rate) dated 08/10/2024 made effective from 10/10/2024 was issued. This notification provides for payment of GST on rent by RCM when supplier of service happens to be a unregistered person and recipient is a registered person and the service is by way of renting of any immovable property other than residential dwelling.

6. As the above amendment, which is the second one on RCM put the composition dealers in to a situation wherein they were required to make payment of GST @18% on all commercial hired in properties by force of law with no corresponding ITC benefits, again there was another anomaly which the Government corrected quickly with effect from 16/01/2025. 

7. Notification Number 07/2025 (CT Rate) was issued on 16/01/2025 to provide relief to composition dealers by suitably amending the original RCM Notification 13/2017 to provide that composition dealers are not covered by Notification 13/2017.

8. This is not the end, as though the language of the notifications as well as intention behind such actions are very clear, the pressure on the taxpayer by the field formation based on revenue targets as well as the novel interpretation of law by Authority for Advance Ruling etc. put even the genuine tax payer in to hardship.

9. To sum up, a table is furnished below in a chronological order covering the major developments on this subject.

Effective From	Reference	Taxability
01/07/2017	12/2017	Residential dwelling unit used for residence - NO GST
18/07/2022	05/2022	Residential dwelling unit let out to a registered person is covered under RCM
01/01/2023	15/2022	RCM not applicable when hired by a proprietorship concern for residence only and not for business use
10/10/2024	09/2024	RCM applicable when let out by a unregistered person to a registered person when property is any immovable property other than residential dwelling
16/01/2025	07/2025	Composition dealers are exempted from RCM requirements which was in force from 10/10/2024

Conclusion: It appears from the above discussions that the CBIC issues notifications on this subject with the sole objective of REVENUE in mind and it is good that based on representations, GST Council recommends for suitable corrections, though not up to the expected level. Before deciding on taxability on renting of immovable property, Notification numbers 12/2017 and 13/2017 as amended up to date are very crucial.

Discussions to this article

[Sadanand Bulbule]

Dear Sir

Very well articulated article on the ticklish issue. Keep enlightening on similar complex subjects.

[deepak gulati]

What will be status of Input of RCM paid by a company on Residential property used by promoters Directors for their residence, will this be counted as for furtherance of business or not

[K Balasubramanian]

Good question Mr.Deepak. I shall cover this, rent on hostel accommodation and on long term lease in part 2 next week.

[Ravikumar Doddi]

Dear Sir,

Thanks for the topic dealt. query regarding RCM on advertisement boards displayed on the  terrace of the immovable properties does RCM applicable or not. please enlighten.