Advertisement
When should a housing society in Mumbai start considering re...
From GST on JDAs to SEBI’s REIT reclassification and the S...
Stay ahead in the world of real estate with our daily podcas...
Stay ahead in the world of real estate with our daily podcas...
In a major relief for small taxpayers enrolled in the composition scheme, the Central Board of Indirect Taxes and Customs (CBIC) has removed the 18% GST liability on rents paid to property owners not registered under GST. This change, effective retrospectively from earlier this month, aims to address the working capital challenges faced by small businesses, especially restaurants and service providers. Previously, GST-registered tenants were required to pay 18% GST under the reverse charge mechanism (RCM) for such rentals, which created financial strain as they were unable to claim input tax credit (ITC). Industry experts have welcomed this move, highlighting its positive impact on small-scale traders and businesses.
In an important move benefitting small taxpayers under the composition scheme, the Central Board of Indirect Taxes and Customs (CBIC) has announced the elimination of the 18% GST on rented premises leased from property owners not registered under GST. This decision, applicable retrospectively from earlier this month, is expected to ease financial pressures on many businesses in the restaurant and service sectors. Advertisement
Previously, regulations mandated that tenants registered under GST were required to pay 18% GST through the reverse charge mechanism (RCM) when renting from unregistered property owners. This created significant working capital challenges for businesses, as they could not claim input tax credit (ITC) for the GST paid under this system. The issue particularly affected restaurants and service providers operating under the composition scheme, whose annual turnover is less than INR 1.50 crore.
Chartered accountant Karim Lakhani observed that the earlier rules posed severe working capital difficulties for small businesses, including traders and manufacturers. He explained that under the composition scheme, taxpayers face limited tax liabilities-ranging between 1% and 6% depending on their business type-and the additional burden of 18% GST on RCM was unsustainable. However, with the CBIC's recent decision, businesses leasing premises from unregistered landlords are now exempt from this GST liability, significantly alleviating their financial stress.
This policy adjustment has been widely lauded by industry experts, who view it as a critical measure to support the growth and sustainability of small enterprises.
Industry experts have applauded the change, recognising it as a practical solution to the working capital issues that previously hindered small businesses. This measure underscores the government's commitment to supporting micro and small enterprises in overcoming financial and operational challenges.
5th Jun, 2025
25th May, 2023
11th May, 2023
27th Apr, 2023
Advertisement
Facebook
Whatsapp
