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RCM Applicability on land lease

kumar (student) (248 Points)

12 September 2024

Hi,

Is RCM applicable on land lease by unregistered dealer to register person ?

We know that, Recent GST council meet decided RCM applicable on let out of commercial properties to registered persons.

Thank you

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3 Replies

Rama chary Rachakonda (Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294) (6306 Points)
Replied 12 September 2024

As per the recent GST Council meeting, RCM (Reverse Charge Mechanism) is indeed applicable on the let-out of commercial properties to registered persons. However, regarding land lease by an unregistered dealer to a registered person, RCM is not applicable. RCM is only applicable when both the lessor (owner of the property) and lessee (the person renting the property) are registered under GST. If the lessor is an unregistered dealer, RCM does not apply. However, if the registered person (lessee) is receiving the service of land lease from an unregistered dealer (lessor), they may need to pay GST under the forward charge mechanism.

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kumar (student) (248 Points)
Replied 12 September 2024

" If the lessor is an unregistered dealer, RCM does not apply. However, if the registered person (lessee) is receiving the service of land lease from an unregistered dealer (lessor), they may need to pay GST under the forward charge mechanism."

I didn't get this. We can't discharge liability under FCM unless the lessor is a registered dealer.

CA VINOD D. RANJANE (VRVK ass (CA ) (24 Points)
Replied 20 January 2025

GST Reverse Charge Mechanism (RCM) on Rent Paid for Land

RCM on Rent: As per Notification No. 09/2024 – Central Tax (Rate) dated October 8, 2024, reverse charge is applicable on rent paid for the use of land if:

The landlord (landowner) is unregistered under GST.
The tenant (e.g., builder) is a registered person.

Inclusivity/Exclusivity: GST under RCM is exclusive of the rent amount. For instance, if the rent agreed is ₹1,00,000, the GST liability is calculated separately on this amount.
Rate of GST: The rate applicable 18% under RCM for renting of land typically depends on the nature of the lease (e.g., long-term, commercial).
Effective Date: This notification is effective from October 10, 2024.

Example

Scenario: A builder rents land from an unregistered individual for ₹1,00,000 per month.

GST Liability under RCM: Assuming a GST rate of 18%:

Rent: ₹1,00,000
GST @ 18%: ₹18,000
Total Outgo: ₹1,18,000
The builder pays ₹1,00,000 to the landowner and deposits ₹18,000 directly as GST under RCM.

Particulars	Amount (₹)
Rent (to landowner)	1,00,000
GST under RCM (18%)	18,000
Total	1,18,000

Property	Supplier	Recipient	GST implications
Residential	Registered	Registered	Taxable under RCM
Residential	Registered	Unregistered	Exempt, if used as a residence
Residential	Unregistered	Registered	Taxable under RCM
Residential	Unregistered	Unregistered	No GST Liability
Commercial	Registered	Registered	Forward Charge
Commercial	Registered	Unregistered	Forward Charge
Commercial	Unregistered	Registered	Taxable under RCM
Commercial	Unregistered	Unregistered	No GST Liability