GST on Rent – Overview
Renting of immovable property is treated as a supply of service under GST and is classified under SAC Code 9972. The GST treatment varies significantly depending on whether the property is commercial or residential, and who the tenant is.
GST on Commercial Property Rent
Renting or leasing of commercial property (offices, shops, warehouses, factories) is taxable at 18% GST.
| Scenario | GST Rate | Tax Type |
|---|---|---|
| Landlord and tenant in same state | 18% | CGST 9% + SGST 9% |
| Landlord and tenant in different states | 18% | IGST 18% |
When is Commercial Rent Exempt?
Commercial rent is exempt if the landlord's aggregate turnover is below ₹20 lakhs (₹10 lakhs for special category states) and they are not registered under GST.
GST on Residential Property Rent
The rules for residential property rent were updated significantly from 18th July 2022:
Tenant is an Unregistered Person (Individual for Personal Use)
Renting of residential property to an unregistered person for personal use is exempt from GST. Most individual tenants fall under this category.
Tenant is a GST-Registered Person
When a residential property is rented to a GST-registered person, GST applies under Reverse Charge Mechanism (RCM). The tenant must pay 18% GST under RCM and can claim ITC if the property is used for business purposes.
ITC on Rent Payments
Tenants who are GST-registered can claim Input Tax Credit on rent paid for business purposes:
- Commercial property rent: ITC available if used for business and tax invoice received
- Residential property rent (under RCM): ITC available if the property is used for business
- Residential property for employees: ITC is blocked under Section 17(5)(g) unless the employer is in the business of providing accommodation
Who Must Charge GST on Rent?
- Registered landlord renting commercial property — charge 18% GST on invoice
- Any landlord renting residential property to a registered person — tenant pays under RCM
- Unregistered landlord renting to unregistered tenant — no GST applicable
Rent-Free Accommodation
If an employer provides rent-free accommodation to employees, it may be treated as a supply between related persons and taxable if the employer claims ITC on the rent. However, this is subject to Schedule I provisions where supply without consideration between related persons is taxable only when ITC has been claimed.
Place of Supply for Rental Services
The place of supply for immovable property services is the location of the property. This means:
- If the property is in Maharashtra and the landlord is in Gujarat, the place of supply is Maharashtra
- IGST applies if the landlord is in a different state from the property
Practical Examples
Example 1: Office Rent
A company in Delhi rents an office in Delhi for ₹1,00,000/month from a registered landlord:
- CGST: ₹9,000 + SGST: ₹9,000 = Total GST: ₹18,000
- Monthly rent payment: ₹1,18,000
- Company claims ₹18,000 as ITC
Example 2: Residential Property for Business
A registered consultant rents a flat in Mumbai for ₹50,000/month from an unregistered landlord for use as an office:
- Consultant pays ₹9,000 GST under RCM (18% of ₹50,000)
- Consultant can claim ₹9,000 as ITC since the flat is used for business
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