COMMERCIAL PROPERTY RENTALS NOW UNDER RCM
The Goods and Services Tax (GST) Council at its 54th meeting also clarified on the tax treatment of preferential location charges.
The Goods and Services Tax (GST) Council at its 54th meeting in New Delhi on September 9 decided to bring renting of commercial property by an unregistered person to a registered person under Reverse Charge Mechanism (RCM), in order to prevent revenue leakage.
The GST Council also decided that commercial property will now come under the reverse charge mechanism. 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.
Clarifies on tax treatment of preferential location charges
The GST Council also clarified on the tax treatment of preferential location charges stating that the PLC paid along with the price for property construction forms a part of the same supply, ie, construction services and hence should be liable at the same rate at which construction services are taxed.
The latest change announced by the Goods and Services Tax (GST) Council regarding taxing rental income from commercial property is likely to improve the government’s tax revenue. But, this may prove costly for tenants, according to industry experts. Renting commercial property owned by a person not registered with the GST Authority has been brought under the reverse charge mechanism (RCM), according to an announcement made on September 9 after the Council’s 54th meeting. This would mean that the commercial tenant will have to deposit the GST.
Earlier, no GST was applicable in such cases. If the landlord was a registered entity, they were liable to pay GST at 18 per cent. It was also the case when a residential property was being used for commercial purposes
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