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Reverse charge mechanism on rentals

23 June 2017

1. what us the minimum threshold of rental income for applying GST by the service provider(Land lord)?

2. Is it different for commercial and non commercial tenants?

3. Incase, the service provider is below the threshold limit, is reverse charge mechanism applicable to a commercial tenant?

4. What if the tenant is dealing only in exempted goods and services? Will the department give a full refund of ITC?

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8 Replies

upasana gupta (Finance Professional) (3931 Points)
Replied 23 June 2017

There is no treshold limit for rental income,if your turnover is above 20 lakhsthen you have to register under GST.

yes there is a difference between commercial and non commercial rental income as residential rental are exempt but commercial rental income is taxed at the rate of 12%.

There is no reverse charge in case of rent.

Refund of ITC can be available if,Unutilized input tax credit on zero-rated goods/services on which no payment of tax was made can be claimed as refund.

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Manish Khimavat (35 Points)
Replied 23 June 2017

so if the rent income is below 20 Lacs then land lord will not charge any gst and nor the tenant has to deposit under rcm.
is it right?

vishwas (PROPRIETOR) (30 Points)
Replied 23 June 2017

Is ir correct to understand then that in the case of a commercial proerty landlord exempt from gst, the tenant if registered under gst will not pay gst under reverse charge, and neither will the gst exempt landlord charge gst on such registered tenant?

Moiz S Vadnagarwala (5 Points)
Replied 23 June 2017

kindly provide reference if any where it is mentioned that there is no Reverse Charge Mechanism incase of Rent.

CS Nisha Nishit (Practicing Company Secretary) (326 Points)
Replied 23 June 2017

Originally posted by : Moiz S Vadnagarwala
	1. what us the minimum threshold of rental income for applying GST by the service provider(Land lord)?2. Is it different for commercial and non commercial tenants?3. Incase, the service provider is below the threshold limit, is reverse charge mechanism applicable to a commercial tenant?4. What if the tenant is dealing only in exempted goods and services? Will the department give a full refund of ITC?

Moisji,

3. Incase Service Provider & Service Reciever is below the threshold limit and is not registered with GST, then no RCM whereas Service Reciever is registered under GST, then RCM will be applicable as per Section 9(4).

4. ITC refund will not be available in case tenant is dealing with only exempt outward supplies.

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CS Nisha Nishit (Practicing Company Secretary) (326 Points)
Replied 23 June 2017

Originally posted by : Manish Khimavat
	so if the rent income is below 20 Lacs then land lord will not charge any gst and nor the tenant has to deposit under rcm.is it right?

Yes. Only when tenant is Registered under GST and lanlord is not registered under GST, this transaction will attract RCM

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