The Odisha Authority of Advance Ruling (AAR) ruled that renting residential premises on rent as a guest house attracts Goods and Services Tax (GST) under Reverse Charge Mechanism (RCM).
Facts of the case:
- The applicant has rented premises in New Delhi, Odisha, and Jajpur as guest houses.
- The applicant used them to provide food and accommodation for the employees who visit their offices.
- The owner of one of the apartments is registered; the other owner is unregistered.
- However, both the houses taken on rent are for guest house purposes and are used by the applicant as the guest house.
The applicant submitted that:
- The term’ residential dwelling’ is not defined in the GST or the earlier Service Tax Act.
- However, the department’s education guide dated 20th June 2012 explained the phrase’ residential dwelling’ as any residential accommodation that does not include a hotel, inn, motel, guest house, camp-site, houseboat, lodge, or other places for a temporary stay.
Amid, the applicant filed for an advance ruling on whether rented residences used as a guest house by the registered person are subject to GST under the Forward Charge Mechanism (FCM) or RCM.
The AAR has held that:
- The nature of rented properties appeared to be residential properties used for commercial purposes.
- W.e.f. 18th July 2022, GST will be applicable even for residential property rented out to a registered person.
- The liability to pay GST @18% under RCM will be on the tenant if he is a registered person under GST.
- The type, nature, or purpose of a residential dwelling has not been a condition in the RCM notification.
- Hence, renting a residential dwelling to a registered person would attract GST under RCM, irrespective of the nature of the use.
For any clarifications/feedback on the topic, please contact the writer at email@example.com
DVSR Anjaneyulu known as AJ, is a Chartered Accountant by profession. Loves to listening to music & spending time with family and friends.