Mon Nov 18 08:36:17 UTC 2024: ## GST’s Reverse Charge Mechanism Impacts Renters Nationwide
**New Delhi:** India’s new Reverse Charge Mechanism (RCM) for GST has come into effect, impacting tenants nationwide for the first time. Previously, only property owners were responsible for GST on rental income. Now, both landlords and tenants must register for GST, with tenants reporting their rental payments and paying 18% GST. However, tenants will largely recoup this tax through input tax credits in subsequent returns.
The RCM aims to curb tax evasion, as many landlords previously failed to report rental income accurately. The application of the RCM varies depending on the GST registration status of both the landlord and tenant:
* **Landlord registered, tenant unregistered:** The landlord collects 18% GST from the tenant.
* **Landlord unregistered, tenant registered:** The tenant pays the 18% GST directly to the government under the RCM.
* **Both unregistered:** No GST applies.
* **Residential property for personal use:** No GST applies.
* **Commercial property or residential property used commercially by a GST-registered entity:** The entity pays 18% GST under the RCM.
The new rules distinguish between residential and commercial properties and their usage, clarifying GST applicability in each scenario. The implementation of RCM is expected to significantly impact the rental market across India.
First Piper 