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The Odisha Authority of Advance Ruling (AAR) determined that the Reverse Charge Mechanism for Goods and Services Tax (GST) is applicable when renting out residential properties as a guest house (RCM).
Case specifics:
- In order to operate guesthouses, the applicant has rented spaces in New Delhi, Odisha, and Jajpur.
- They were employed by the application to provide lodging and food for the staff members who traveled to their offices.
- One of the units’ owners is registered, but the other owner is not.
- Nonetheless, the applicant uses both of the residences that were taken on rent for guest house purposes.
According to the application:
- In either the GST or the former Service Tax Act, the phrase “residential abode” is not defined.
- The phrase “residential habitation” is defined as any residential accommodation that is not a hotel, inn, motel, guest house, camp-site, houseboat, lodge, or another facility for a brief stay in the department’s teaching guide dated 20th June 2012.
In the midst of this, the applicant asked for an early decision on whether the registered person must pay GST under the RCM or the Forward Charge Mechanism (FCM) for rented homes utilised as guest houses.
The AAR has maintained that:
- The type of rental houses seemed to be residential ones that were being used for business.
- Beginning on July 18, 2022, GST will be charged on residential property that is rented to a registered person.
- If the tenant is a registered person for GST, he will be responsible for paying GST @ 18% under RCM.
- The RCM announcement did not include any requirements about the nature, kind, or purpose of a residential dwelling.
- So, regardless of the type of use, renting a residential property to a registered person would be subject to GST under RCM.
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