Big Relief for Small Taxpayers: No GST on Leased Premises
By: Admin
Date: January 22, 2025
Categories: GST Recent News
Reading Time: 4 Min
Introduction: A Landmark Reform for Small Taxpayers
In a significant move to support small taxpayers, the Central Board of Indirect Taxes and Customs (CBIC) has eliminated the 18% GST on rent for leased premises. This exemption applies when the property owner is not registered under GST. The change particularly benefits businesses under the composition scheme, including restaurants and small service providers.
Background: Understanding the Previous GST Regulations
Previously, tenants registered under GST had to pay an 18% tax through the reverse charge mechanism (RCM). This applied when renting premises from unregistered property owners.
Challenges Faced by Small Businesses
- No Input Tax Credit (ITC): Small businesses under the composition scheme could not claim ITC for the GST paid. As a result, they faced liquidity issues.
- High Tax Burden: Businesses with turnovers below ₹1.5 crore already pay 1-6% tax. The additional GST on rent made their financial situation worse.
These challenges severely impacted their ability to sustain and grow operations.
The CBIC’s Announcement: A Much-Needed Relief
On January 22, 2025, the CBIC announced the removal of the 18% GST on rent for composition scheme taxpayers. This decision brought immediate relief to struggling small businesses.
Retrospective Application
The notification applies retrospectively from October 10, 2024. This effectively reverses the financial burden faced by small traders, manufacturers, and restaurants during this period.
Expert Opinions: Why This Matters
Tax experts have praised this decision for its positive impact on small businesses.
- Working Capital Relief:
“Small businesses had to divert funds to pay GST on rent. Removing this requirement improves their cash flow,” an expert explained. - Focus on Growth:
Without the additional GST liability, small taxpayers can now prioritize expansion and business improvements.
Key Benefits of the Reform
- Reduced Financial Strain:
Businesses no longer need to use working capital to pay GST on rent. - Simplified Compliance:
The exemption simplifies GST processes, making compliance easier for small taxpayers. - Support for Critical Sectors:
This change benefits industries like hospitality, retail, and manufacturing, which are crucial to the economy.
Conclusion: A Step Towards Progress
This reform demonstrates the government’s commitment to creating a business-friendly environment. It not only alleviates financial pressure but also enables small businesses to focus on growth. By addressing these challenges, the government has taken a step toward simplifying GST compliance and supporting small taxpayers across India.
