Important Updates on Renting Commercial Property and Tax Compliance in India
Recent notifications from the government have brought significant changes in the taxation landscape, particularly concerning renting commercial property, invoicing requirements, and filing obligations for TDS deductors. Here’s a summary of the key updates.
Renting Commercial Property Under Reverse Charge Mechanism (RCM)
When a registered person rents commercial property from an unregistered supplier, they are required to pay tax under the Reverse Charge Mechanism (RCM). It is crucial to note that if the unregistered supplier’s turnover exceeds the threshold of ₹20 lakhs (or ₹10 lakhs, as applicable), they must register and charge tax under the Forward Charge mechanism. In such cases, RCM will not apply.
Reference: Notification No. 09/2024- Central Tax (Rate) dated 8th October 2024.
Time Limit for Self-Invoicing
For transactions covered under RCM, there is a new time limit for issuing self-invoices, set at 30 days from the receipt of the supply. The time of supply for unregistered suppliers is defined as the earlier of:
- The date of payment recorded in the recipient’s books or the date of debit in the bank account, whichever is earlier.
- The date when the recipient issues the invoice.
Each supply must have a separate self-invoice, meaning that consolidation of invoices from multiple suppliers is not permitted.
Reference: Notification No. 20/2024-CT dated 8th October 2024.
Merging Sections 73 and 74 into Section 74A
A new section, 74A, has been introduced to consolidate demand and recovery provisions, replacing Sections 73 and 74 effective from the 2024-25 fiscal year. This includes:
- A uniform time limit of 42 months for all evasion and non-evasion cases from the due date for filing the annual return.
- Orders must be completed within 12 months of issuing a notice, extendable by 6 months if justified in writing by an officer of the required rank.
- The timeline for reduced penalties has been increased from 30 to 60 days from the date of notice/order.
Necessary amendments have been made to the rules to reflect this change.
Reference: Notification No. 20/2024-CT dated 8th October 2024.
Changes to Rule 96(10)
Previously, inputs imported without the payment of integrated tax and compensation cess could not be exported with tax payment. This restriction has now been lifted, allowing equal treatment for regular exporters in terms of calculation and procedure. Additionally, refund procedures for deemed exports and other specific categories have been updated accordingly.
Reference: Notification No. 20/2024-CT dated 8th October 2024.
Reduced Late Fees for GSTR-7 Filers (TDS Deductors)
For TDS deductors, filing GSTR-7 has now become mandatory every month, regardless of whether any deductions were made. The late fees structure has been revised:
- Nil return filers: No late fees.
- Other filers: ₹50 per day, with a cap at ₹2000.
Reference: Notification No. 23/2024-CT dated 8th October 2024