CBIC excludes GST on rental of immovable property under RCM: The Central Board of Indirect Taxes and Customs has announced a rebate of 18 percent GST, giving a big relief to small traders and entrepreneurs registered under the composition scheme. According to the new CBIC notification, the structure means that the 18 per cent GST applicable under the reverse charge mechanism will not be payable on property rented from unregistered property owners by registered taxpayers under the Lamsam scheme.
tax burden will be reduced
Reverse charge mechanism is a tax levied on property leased by an unregistered person to a registered dealer. In which taxpayers registered under the composition scheme will have to pay 18 percent GST under reverse charge. Besides, the benefit of input tax credit is also not available in this. The result is that their tax burden increases. This tax burden will be reduced with the new notification.
Small taxpayers will benefit
Taking advantage of the composition scheme, GST taxpayers pay tax at a fixed rate of their turnover without following any GST procedure. If the merchant opting for the composition scheme is a service provider with an annual turnover of Rs. 50 lakh and in case of trader or manufacturer his annual turnover is Rs. Should be less than Rs 1.50 crore. However, they do not get input tax credit on GST payment. As a result the burden of working capital increases. To remove this burden, CBIC has decided to waive 18 percent GST.
The plight of small traders will be alleviated
Chartered Accountant Karim Lakhani said, under the new restrictions implemented in October, 2024, small businessmen involved in composition scheme and leasing property, especially those in the restaurant business, suffered huge losses as they were burdened with 18 per cent GST. . It was under reverse charge mechanism and apart from this, input tax credit was also not available on it. To address these burdens, the CBIC issued a circular on January 16 and said, ‘To avoid collecting GST at the rate of 18 per cent under the provision of reverse charge mechanism, if a dealer takes rent from anyone, The provision introduced in 2024 has canceled the application of an unregistered person under the composition scheme. Therefore, if traders opting for composition rent out commercial properties including shops, offices, godowns or godowns, they will no longer have to pay 18 per cent GST.’
