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GST News: If any non-residential immovable property is given on rent to a registered person by a person who is not registered for GST, the registered person himself will have to deposit 18 per cent of the rental amount to the government under Goods and Services Tax. Thus, if the renter of shop, office, warehouse, land or co-working space is a registered person, the person renting space from him will have to deposit GST at the rate of 18 percent. Any non-residential property let for any purpose by a registered dealer to an unregistered person or company or organization will be liable to pay GST at the rate of 18 per cent in addition to the rent.
This circular issued by CBIC on October 8 will be applicable in the entire country from October 10. However, 18 GST was already imposed on renting out commercial property. According to GST expert and chartered accountant Haim Chajed, after this new circular, a residential house is given on rent by an individual to someone and the lessor is not registered for GST and the lessee is also not registered, they are subject to goods and services. Will be. Will be exempted from paying tax. In other words, no GST will be levied on these.
On the other hand, if a GST registered person owns a residential property and rents it out to someone for business purposes, he will have to pay GST at the rate of 18 percent on his rental income. Thus, in this deal only the lessor of the asset will have to pay Goods and Services Tax.
Third, if the property is a residential property and the property is let out on rent only for residential purposes and the lessor is not GST registered and the lessee is a registered individual or organization, then they will be exempted from paying GST. 4. If the property is residential and is given on rent for commercial purposes and the lessee is not GST registered and rents the property to a person with GST registration, then the lessor and the person paying the rent will directly charge 18% GST on it. Will deposit. The government will have to do it. This arrangement is known as reverse charge mechanism.
Restaurant costs will increase, dishes will be expensive
The restaurant space is also mostly on rent. The restaurant must have GST registration. But if the lessee is not registered, the restaurant operators will have to deposit 18 percent GST on the rental amount under the reverse charge mechanism. Now these restaurants will deposit 18 percent which will be their additional cost. There is no way to get credit for it. They are not entitled to a refund of the 5 per cent GST charged on restaurant dishes. Therefore, there is no option to adjust the amount of 18 percent GST on the rental amount. Similarly, these restaurants also do e-commerce. Its products are delivered through delivery operators like Swiggy and Zomato. The GST amount on delivery of Swiggy and Zomato products is collected from the buyer and deposited directly with the government. So it becomes a discounted service against the restaurant. Therefore, input tax credit of that amount is not available to him. The burden of this additional cost will be passed on to the consumer by increasing the price of dishes.
People coming in inverted duty structure will fill
Due to this circular coming into effect from October 10, businesses that have been exempted from the inverted duty structure will not be able to get any refund under this arrangement. There is a possibility of their huge amount being blocked. For example, a company pays about 18 percent goods and services tax for purchasing raw materials and manufacturing finished products. Since 12 percent GST is levied on their finished products, about six percent of their money remains permanently deposited in the GST office. This amount gets blocked for them forever. Now they themselves are registered in GST. But if they rent property or office for any purpose from a person who is not registered in GST, they will have to pay 18 percent GST. They will get credit for this amount of GST, but will not get a refund. Because the service is not returned at all. Thus providing property on rent is a service. It cannot be returned.
What will be the impact on GST registered traders falling in the exempted category?
Chartered accountant Haim Chajed said that due to this new circular, business owners falling in the exempted category will be put in a very bad situation, 'The exempted category includes those providing hospital services, e-commerce ones. E-commerce ones are registered but they are exempted from GST. For example, hospitals commonly rent space. Hospitals will have to be registered in GST. They will have to pay GST at the rate of 18 percent on rented property. But even if input tax credit comes to his account, he will not be able to use it. They cannot even take it back as a refund. Thus, there will be an additional burden of 18 percent on those running hospitals on rent.
Traders choosing the Lamsum option will fill
Traders choosing the composite i.e. lump sum option generally have to deposit GST at one per cent of income or six per cent of income in case of service providers. If they are running a business on rented premises, their costs will be increased by the 18 per cent GST payable on their inventory. Those opting for Lamsam must have GST registration. If they rent their property from an unregistered person or institution, they will have to pay 18 percent GST on it. They will not be able to get input tax credit of this eighteen percent amount because they have already opted for Lamsam. Similarly, a trader opting for GST Composite i.e. Lamsam will have to pay GST at the rate of 18 per cent under the reverse charge mechanism if the residential property is let out for commercial purposes and the lessor is not GST registered. He will not get his input tax credit.