Understanding Notification No. 09/2024
Understanding Notification No. 09/2024 On 8th October 2024, the Ministry of Finance, Government of India, issued Notification No. 09/2024 – Union Territory Tax (Rate) under the Union Territory Goods and Services Tax Act, 2017 (UTGST). GST New Notification No This notification introduced a significant amendment to the existing reverse charge mechanism under the UTGST Act. GST New Notification No It specifically targets the renting of non-residential properties in Union Territories when the service is provided by an unregistered person to a registered person.
In this blog, we will break down this new notification, its implications, and the changes it brings to the GST compliance landscape for businesses operating in Union Territories.
What is Notification No. 09/2024 – Union Territory Tax (Rate)?
Understanding Notification No. 09/2024 Notification No. 09/2024, dated 8th October 2024, amends the original Notification No. 13/2017 – Union Territory Tax (Rate), which was issued on 28th June 2017. GST New Notification No The amendment introduces a new reverse charge mechanism (RCM) for the renting of non-residential property by an unregistered person to a registered person in Union Territories.
Understanding Notification No. 09/2024 This new RCM provision, effective from 10th October 2024, shifts the responsibility of paying Union Territory Goods and Services Tax (UTGST) from the supplier (unregistered person) to the recipient (registered person). This means that when a registered entity in a Union Territory rents a commercial property from an unregistered person, it is the registered entity that needs to discharge the applicable UTGST under RCM.
Understanding the Reverse Charge Mechanism (RCM)
Before diving into the specifics of this notification, let’s briefly understand the concept of the reverse charge mechanism (RCM) under GST:
- Understanding Notification No. 09/2024 Under a normal charge mechanism, the supplier of goods or services is responsible for collecting and depositing the GST with the government.
- However, under RCM, the recipient (buyer or service receiver) is required to pay the GST instead of the supplier.
- RCM is typically applied in cases where the supplier is unregistered or where there is a specific provision in the law that shifts the GST liability to the recipient.
RCM Provisions in UTGST:
The UTGST Act allows the Central Government to notify certain categories of services where RCM will apply. GST New Notification No This is done to ensure tax compliance, especially when dealing with unregistered service providers, and to bring more transactions under the GST net. Understanding Notification No. 09/2024
Details of the Amendment in Notification No. 09/2024
Insertion of New Entry: 5AB
The key change introduced by Notification No. 09/2024 is the insertion of a new entry, 5AB, in the original notification’s table. The details of this new entry are as follows:
| S. No | Category of Service | Supplier of Service | Recipient of Service |
| 5AB | Service by way of renting of any property other than residential dwelling | Any unregistered person | Any registered person |
Implication of the Amendment
- Service Category: Renting of non-residential or commercial properties, such as office spaces, shops, warehouses, etc.
- Supplier: GST New Notification No Any unregistered person (individuals, HUFs, or businesses not registered under GST).
- Recipient: Any registered person under GST in the Union Territory, such as a registered business entity or company.
- GST Liability: The recipient (registered person) will be liable to pay GST under RCM.
Effective Date:
This amendment comes into effect from 10th October 2024. From this date onward, any registered person in Union Territories receiving non-residential rental services from an unregistered person must pay GST under the reverse charge mechanism.
- Impact of Notification No. 09/2024 on Businesses
This notification primarily affects businesses and entities operating in Union Territories such as:
- Delhi
- Chandigarh
- Puducherry
- Dadra and Nagar Haveli and Daman and Diu
- Andaman and Nicobar Islands
- Lakshadweep
Who Will Be Affected?
The new RCM provision is particularly relevant for:
- Registered Businesses:
- Any registered business or company leasing commercial property from unregistered landlords will now have to calculate, deposit, and report the applicable UTGST on such transactions. GST New Notification No
- Unregistered Landlords:
- Understanding Notification No. 09/2024 Individuals or entities not registered under GST, who were previously not involved in GST compliance, will see a change in the way their services are taxed when renting properties to registered businesses.
Example:
ABC Pvt. Ltd., a company registered under GST in Delhi, rents an office space from Mr. Sharma, an individual not registered under GST. Understanding Notification No. 09/2024
- Before 10th October 2024: Mr. Sharma was not required to charge or deposit GST on the rent received.
- After 10th October 2024: ABC Pvt. Ltd. will have to pay GST on the rent under the reverse charge mechanism and include the details in their monthly GSTR-3B returns.
Compliance Requirements for Registered Persons
Steps to Comply with RCM on Renting of Non-Residential Property
- Calculate UTGST:
- The registered recipient must calculate the UTGST on the rental value as per the applicable rate (typically 18% GST split into 9% CGST and 9% UTGST).
- Pay UTGST through the GST Portal:
- The liability must be paid using the GST portal, and it should be mentioned as RCM liability in the returns.
- Input Tax Credit (ITC):
- Understanding Notification No. 09/2024 Once the tax is paid under RCM, the recipient can claim input tax credit (ITC) on the amount paid, provided the property is used for business purposes.
- Reporting in GSTR-3B and GSTR-2:
- The registered person must report the RCM liability in their monthly GSTR-3B return.
- It must also be reflected in GSTR-2 (for matching purposes).
Example:
If the monthly rent paid by ABC Pvt. Ltd. is ₹50,000, the applicable UTGST would be 9% of ₹50,000 = ₹4,500.
- ABC Pvt. Ltd. will pay ₹4,500 as UTGST under RCM and simultaneously claim ITC of ₹4,500 (if eligible).
Why Was This Change Introduced?
The government has introduced this change to:
- Ensure that tax evasion is minimized in transactions where the supplier is unregistered.
- Bring more transactions under the GST net by making the recipient liable.
- Improve tax compliance in the Union Territories, which often have unique compliance challenges.
Conclusion
Understanding Notification No. 09/2024 Notification No. 09/2024 brings a critical change to GST compliance for businesses in Union Territories. The shift of GST liability to registered recipients for renting non-residential properties will require affected businesses to re-evaluate their GST accounting and reporting processes. Understanding Notification No. 09/2024 No Companies should ensure that they have robust systems in place to track and report RCM liabilities accurately, to avoid any compliance issues in the future. https://www.gst.gov.in/’
By staying informed about these changes and understanding the nuances of the notification, businesses can not only ensure compliance but also manage their cash flows and tax liabilities more effectively. Understanding Notification No. 09/2024
If you have any questions about how this notification might affect your business or require assistance with GST compliance, feel free to reach out to a qualified GST professional.
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