Changed national GST policy on residential rent

Successfully challenged selective withdrawal of GST exemption on residential dwelling under reverse charge. GST Council issued Notification No. 15/2022-Central Tax (Rate) nationwide.

The issue

The exemption available to renting of a residential dwelling was withdrawn in those cases where the tenant is registered under GST.

A small general store merchant, who runs his business in his individual capacity, is registered under GST — and he was therefore required to pay GST under reverse charge on the residential dwelling he had taken on rent. But there was no such liability on persons financially much better off, such as doctors, engineers, civil servants and business tycoons who run their business through a corporate entity.

Why it matters

The Delhi High Court held that the selective withdrawal of the exemption was arbitrary.

Revenue conceded that GST would not be recovered from those individuals who do not book rent as a business expense, and undertook to propose a suitable amendment at the next GST Council meeting.

The 48th GST Council Meeting accepted the amendment, and Notification No. 15/2022-Central Tax (Rate) dated 30.12.2022 was issued — so the position changed for every such taxpayer in the country, not only the petitioner.

Related practice area

This matter falls within our constitutional challenges practice.