Commercial Property Rentals Now Under Reverse Charge Mechanism: 54th GST Council
📅 By Admin | September 10, 2024
📂 Categories: GST Recent News
⏳ 4 Min Read
The GST Council met on September 9, 2024, in New Delhi, and decided to include the renting of commercial property by an unregistered person to a registered person under the Reverse Charge Mechanism (RCM). This change aims to prevent revenue leakage and boost compliance.
Under the new rule, tenants will now be responsible for paying GST on commercial rental services instead of landlords. Revenue Secretary Sanjay Malhotra announced, “Renting of commercial properties is now under the reverse charge mechanism.”
Experts believe that this change could increase compliance requirements for registered taxpayers. Consequently, tenants will need to calculate their GST liability for commercial leases at various business locations.
Clarification on Preferential Location Charges (PLC)
The GST Council also clarified the tax treatment of Preferential Location Charges (PLC). The new guidelines specify that these charges, paid with property construction costs, will be considered part of the same supply as construction services and taxed accordingly.
- Residential construction: 5% GST
- Commercial construction: 12% GST
This clarification addresses previous confusion about whether PLC should be taxed separately at 18% or included with construction services at rates of 5% or 12%. As a result, builders and buyers now have clear guidance on the taxability of PLC, which will be bundled with construction services.
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