GST on Commercial Rent: Applicability and Compliance
Renting out commercial spaces like offices, shops, and warehouses is a common business activity in India. But did you know that such rental income is taxable under GST? This blog explains everything you need to know about the gst on commercial rent, in a simple and clear manner.
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Is GST Applicable on Commercial Rent?
Yes, under GST law, renting commercial property is treated as a taxable supply of service. If you’re renting out office space, a shop, or a warehouse, GST is applicable at 18% on the rent received.
- Office spaces
- Shops
- Godowns and warehouses
- Commercial complexes
Even if the building is residential in nature but rented out for business purposes, GST applies.
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What is the GST Registration Requirement for Landlords?
If your total annual income (including rent and other services) exceeds ₹20 lakh (₹10 lakh in special category states), you must register under GST. After registration, landlords must charge and collect GST on rent for commercial property.
- Full-time landlords
- Property owners renting part-time
- Businesses or individuals letting out commercial property
What is the Reverse Charge Mechanism?
If a registered tenant rents commercial property from an unregistered landlord, the tenant must pay GST under the Reverse Charge Mechanism (RCM).
- The tenant pays 18% GST directly to the government.
- The tenant can claim Input Tax Credit (if eligible).
- The landlord does not collect or file GST.
This rule ensures GST collection even when the landlord isn’t GST-registered.
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How to Calculate GST on Commercial Rent
It’s simple: apply 18% GST on the agreed rent amount.
- Monthly rent: ₹50,000
- GST @18%: ₹9,000
- Total payable: ₹59,000
The tenant pays GST in addition to the rent charged.
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GST Compliance for Landlords
- Register under GST if your turnover crosses the threshold.
- Issue GST-compliant invoices with tax details.
- Collect and deposit GST before due dates.
- File monthly GST returns like GSTR-1 and GSTR-3B.
- Maintain records of rent agreements, payment receipts, and invoices.
Input Tax Credit for Tenants
Tenants who are GST-registered and use the property for business purposes can claim Input Tax Credit on the GST paid on rent. This reduces their overall tax burden and supports better cash flow.
Conclusion
The gst on commercial rent is straightforward: If you’re renting property for business use and meet the turnover threshold, 18% GST applies. Whether it’s gst commercial property rent or gst on shop rent, staying compliant with GST rules is essential to avoid penalties and ensure smooth business operations.
I am a Chartered Accountant with over 20 years of experience and a finance content writer. I focus on educating people about finance and taxation. I have written many blog posts on finance, taxation, trading, and investment on the BUSY website. My goal is to increase financial understanding by making complex concepts easier to grasp and to support educational programs in India.
Frequently Asked Questions (FAQs)
- Is GST charged on renting a shop or showroom?Yes. GST on shop rent is 18%, applicable when rented for commercial use.
- What if the landlord is not registered under GST?If the tenant is registered and the landlord is not, GST is paid under Reverse Charge Mechanism (RCM) by the tenant.
- Is GST applicable on a residential property rented as an office?Yes, if a residential unit is used for commercial purposes, GST at 18% applies on the rent.
- Can the landlord claim Input Tax Credit?Yes, if registered and using taxable inputs (like repairs or property maintenance), landlords can claim Input Tax Credit (ITC).
- What if the rent is below ₹20 lakh per year?If the landlord’s total annual income is below ₹20 lakh, they’re not required to register for GST. In such cases, GST is not applicable unless the tenant is registered—then RCM may apply.
