Odisha AAR: Renting Residene as a Guest House Attracts GST under RCM

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 dvsr.anjaneyulu@clear.in

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