New GST on Commercial Rent: Applicability and Compliance
Quick Summary
- Commercial rent in India is subject to an 18% GST rate for offices, shops, warehouses, and co-working spaces.
- Renting to SEZ units is zero-rated under certain conditions, or 18% IGST with a refund option.
- Landlords with annual income over ₹20 lakh must register for GST and collect it on commercial rent.
- Tenants renting from unregistered landlords must pay GST under the Reverse Charge Mechanism.
- GST-registered tenants can claim Input Tax Credit on the GST paid for business-use rental properties.
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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GST on Rent in India
Commercial property renting and leasing services fall under SAC Code 997212 in the GST framework. Businesses that rent offices, shops, warehouses, or workspaces are generally required to charge 18% GST on the rental amount, provided the landlord is registered under GST.
Even under the updated GST structure effective after 22 September 2025, the GST rate on commercial renting remains unchanged at 18%. The table below shows both the old and new rates for clarity.
New GST Rate on Commercial Renting Services
| Type of Rental Service |
SAC Code | New GST Rate (After 22 Sep) |
Old GST Rate (Before 22 Sep) |
ITC / Notes |
|---|---|---|---|---|
| Renting or leasing of non-residential property (offices, shops, showrooms) | 997212 | 18% | 18% | Input Tax Credit generally available to the tenant if used for business |
| Warehouses, godowns, and cold storage used for commercial purposes | 997212 | 18% | 18% | ITC available; applies to both basic and fully fitted spaces |
| Co-working spaces and business centres (workspace licensing) | 997212 | 18% | 18% | Covers shared office seats or licensed workspaces |
| Renting to SEZ units or developers for authorised operations | 997212 | 0% (zero-rated) / 18% IGST with refund | 0% (zero-rated) / 18% IGST with refund | Zero-rated supply under LUT or refund mechanism |
| Landlord not registered under GST (below threshold) | — | Not applicable | Not applicable | GST is not charged if the landlord is not required to register |
Service Renting or leasing of non-residential property (offices, shops, showrooms)
(After 22 Sep) 18%
(Before 22 Sep) 18%
Service Warehouses, godowns, and cold storage used for commercial purposes
(After 22 Sep) 18%
(Before 22 Sep) 18%
Service Co-working spaces and business centres (workspace licensing)
(After 22 Sep) 18%
(Before 22 Sep) 18%
Service Renting to SEZ units or developers for authorised operations
(After 22 Sep) 0% (zero-rated) / 18% IGST with refund
(Before 22 Sep) 0% (zero-rated) / 18% IGST with refund
Service Landlord not registered under GST (below threshold)
(After 22 Sep) Not applicable
(Before 22 Sep) Not applicable
Charge Mechanism (Forward vs RCM)
| Lessor (Who rents out) |
Lessee (Who takes on rent) |
New GST Rate |
Charge Type |
|---|---|---|---|
| Private owner/landlord (registered) | Any business | 18% | Forward charge (landlord collects GST) |
| Central/State Govt. or Local Authority | Registered business entity | 18% | RCM (tenant pays under reverse charge) |
| Government bodies | Unregistered individual (non-business) | 0% | Exempt / outside GST |
(Who rents out) Private owner/landlord (registered)
(Who takes on rent) Any business
Rate 18%
(Who rents out) Central/State Govt. or Local Authority
(Who takes on rent) Registered business entity
Rate 18%
(Who rents out) Government bodies
(Who takes on rent) Unregistered individual (non-business)
Rate 0%
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 paid 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.
