GST rules need tenants to pay 18% tax on leased commercial properties
Real Estate

GST rules need tenants to pay 18% tax on leased commercial properties

Starting October 10, 2024, the GST department has introduced new rules impacting tenants leasing commercial properties. Under the new regulations, if the property owner is not registered under GST but the tenant is, the tenant must pay 18% GST through the reverse charge mechanism (RCM).

This rule could pose challenges for tenants under the composition scheme, such as small restaurants, as they will have to pay GST without being able to claim input tax credit (ITC), potentially increasing their working capital needs. 

Chartered accountant Karim Lakhani explained that typically, property owners registered under GST collect and pay GST to the government under the forward charge mechanism (FCM). However, under the new rules, tenants must now pay 18% GST under RCM if the owner is not registered but the tenant is. Regular taxpayers can claim ITC, but those under the composition scheme cannot.

The composition scheme is available to small taxpayers with an annual turnover of less than Rs 7.5 million, and they cannot claim ITC on their expenses. This could result in higher costs for small manufacturers, traders, and service providers who lease commercial properties.

The rules do not apply if neither the tenant nor the owner is registered under GST. However, if both are registered, or if only the owner is registered, the GST follows the FCM, where the owner collects and pays the tax.

With most property owners unregistered, tenants will need to handle their RCM liability through cash or cheque, as they cannot use their ITC balance for these payments, added Lakhani. 
(ET)

Starting October 10, 2024, the GST department has introduced new rules impacting tenants leasing commercial properties. Under the new regulations, if the property owner is not registered under GST but the tenant is, the tenant must pay 18% GST through the reverse charge mechanism (RCM).This rule could pose challenges for tenants under the composition scheme, such as small restaurants, as they will have to pay GST without being able to claim input tax credit (ITC), potentially increasing their working capital needs. Chartered accountant Karim Lakhani explained that typically, property owners registered under GST collect and pay GST to the government under the forward charge mechanism (FCM). However, under the new rules, tenants must now pay 18% GST under RCM if the owner is not registered but the tenant is. Regular taxpayers can claim ITC, but those under the composition scheme cannot.The composition scheme is available to small taxpayers with an annual turnover of less than Rs 7.5 million, and they cannot claim ITC on their expenses. This could result in higher costs for small manufacturers, traders, and service providers who lease commercial properties.The rules do not apply if neither the tenant nor the owner is registered under GST. However, if both are registered, or if only the owner is registered, the GST follows the FCM, where the owner collects and pays the tax.With most property owners unregistered, tenants will need to handle their RCM liability through cash or cheque, as they cannot use their ITC balance for these payments, added Lakhani. (ET)

Next Story
Technology

BBMP Pledges Faster E-Khata Processing Amid Citizen Complaints

Facing mounting complaints over delays in e-khata issuance, the Bruhat Bengaluru Mahanagara Palike (BBMP) has promised to resolve the issue within 10 days. BBMP Chief Commissioner Tushar Giri Nath assured citizens that efforts are underway to expedite processing rates from the current 2,000 to a target of 10,000–15,000 applications daily. "We have cleared 90% of the 90,000 pending applications, leaving only 4,500 to process. To meet the demand, over 800 additional staff and assistant revenue officers (AROs) have been deployed to manage applications in each ward," Nath stated. Persistent Dela..

Next Story
Real Estate

Delhi HC Orders DDA to Assist CBI in Housing Lapses Probe

The Delhi High Court has instructed the Delhi Development Authority (DDA) to fully cooperate with the Central Bureau of Investigation (CBI) in its probe into alleged lapses in the construction of 336 high-rise HIG/MIG houses at Signature View Apartments, north Delhi. Justice Chandra Dhari Singh emphasized that DDA must furnish information about any internal inquiry and the officials involved to facilitate the investigation. The court noted CBI’s submission that DDA had not responded to multiple reminders since July, delaying the probe. The CBI is investigating allegations of "cheating, crimi..

Next Story
Infrastructure Urban

Mahindra Lifespace to Appeal Tamil Nadu GST Tax Demand

Mahindra Lifespace Developers Ltd has announced a tax demand of Rs 20.9 million imposed by the Tamil Nadu GST department, including interest and penalties. The order, issued by the Assistant Commissioner of State Tax, Chengalpattu, cites an alleged shortfall in GST payments under Section 74 of the GST Act, 2017. The realty firm refuted the allegations, stating, “Based on the company's assessment, there is no noncompliance, and a general penalty has been imposed.” The company plans to appeal the order, expressing confidence in a favorable resolution. Mahindra Lifespace assured stakeholders ..

Hi There!

"Now get regular updates from CW Magazine on WhatsApp!

Join the CW WhatsApp channel for the latest news, industry events, expert insights, and project updates from the construction and infrastructure industry.

Click the link below to join"

+91 81086 03000