GST on rent: when the tenant pays under reverse charge

Quick answer

The reverse charge on commercial rent from unregistered landlords applies from 10 October 2024.

What the tenant must do

1. Issue a self-invoice for each rent period, within 30 days of receiving the service, because the unregistered landlord can't issue a tax invoice.
2. Issue a payment voucher when paying rent.
3. Pay the GST in cash through GSTR-3B (Table 3.1(d)). RCM tax can't be paid using ITC.
4. Claim ITC of the same amount in GSTR-3B (Table 4A(3)) if the premises are used for taxable business.

The cash outflow is temporary for most businesses: you pay in cash and take the same amount back as ITC.

Example

Monthly office rent ₹50,000 paid to an unregistered landlord by a registered trader.

• GST under RCM: ₹50,000 × 18% = ₹9,000 (₹4,500 CGST + ₹4,500 SGST), paid in cash.
• ITC of ₹9,000 available in the same month if conditions are met.

Accounting entries

• Rent expense: Rent A/c Dr ₹50,000, To Landlord A/c ₹50,000
• RCM liability: Input CGST/SGST (RCM) A/c Dr ₹9,000, To Output CGST/SGST (RCM) Payable A/c ₹9,000
• Payment: Output CGST/SGST (RCM) Payable A/c Dr ₹9,000, To Electronic Cash Ledger ₹9,000

Common mistakes

• Not paying RCM because the landlord "doesn't do GST". The liability is the tenant's.
• Paying RCM from ITC instead of cash.
• Forgetting the self-invoice, which is needed to claim ITC.

Related

• Reverse charge transactions: accounting and reporting
• Reverse charge (RCM) entries
• TDS on rent, commission and purchase of goods

Sources

• RCM on renting of commercial immovable property by unregistered person to registered person