CBIC Excludes GST on Renting of Immovable Property under RCM for Composition Taxpayers [Read Notification]

In a significant relief for composition taxpayers, the Central Board of Indirect Taxes and Customs ( CBIC ) has announced the removal of the Goods and Services Tax ( GST ) under Reverse Charge Mechanism ( RCM ) on the renting of immovable property for those availing the Composition Levy Scheme.

This update was made through Notification No. 07/2025-Central Tax (Rate), based on recommendations from the 55th GST Council Meeting held in December.

Previously, any GST-registered recipient, including composition taxpayers, who rented immovable property (excluding residential premises) from unregistered landlords, was required to pay 18% GST under RCM. This placed an undue burden on composition taxpayers as they were not eligible to claim Input Tax Credit (ITC) for the GST paid under RCM, increasing their effective costs.

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However, the new notification now exempts composition taxpayers from paying GST under RCM on such rentals. This change is aimed at reducing compliance costs and alleviating financial burdens for small and medium enterprises (SMEs) under the Composition Scheme.

Key Highlights of the Notification:

1. Exemption from RCM: Composition taxpayers no longer need to pay GST under RCM for renting immovable properties from unregistered persons.
   
2. No Refunds for Past Payments: Taxpayers who have already filed CMP-08 (Quarterly Return for Composition Scheme) and paid GST under RCM prior to January 16, 2025, will not be eligible for refunds.
   
3. No Penalties for Non-Payment: Taxpayers who have not discharged RCM for earlier quarters will not face Show Cause Notices (SCNs) or penalties, as the provision has been regularized on an “as-is-where-is” basis.
   
4. Upcoming Deadline Alert: Composition taxpayers are reminded that January 18, 2025, is the deadline for filing CMP-08 for Quarter 3 of FY 2024-25. Taxpayers are advised to exclude RCM payments on such rentals for this filing.

Implications for Composition Taxpayers

This announcement is expected to simplify compliance for small businesses under the GST regime, particularly those in the retail and service sectors who often rent premises from unregistered landlords. The decision underscores the GST Council’s commitment to creating a business-friendly tax environment for SMEs.

Taxpayers and business owners are urged to consult their tax advisors to avoid errors in their CMP-08 filings.

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