New GST on Commercial Rent: Applicability and Compliance
- The gst on rent of commercial property is generally 18% for offices, shops, godowns, warehouses, and other commercial premises.
- Renting to an SEZ unit/developer can qualify as a zero-rated supply when the property is used for authorised operations, subject to applicable GST conditions.
- Landlords supplying taxable commercial rental services must register when their aggregate turnover crosses the applicable GST registration threshold, unless compulsory registration provisions apply.
- When an unregistered landlord rents commercial property to a GST-registered tenant, 18% GST is payable under RCM, subject to the applicable provisions and exclusions for composition taxpayers.
- Registered tenants can claim eligible Input Tax Credit (ITC) on commercial rent used for business purposes, subject to GST conditions.
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.
The gst on commercial property rent is generally 18% under SAC 997212. The rate remains unchanged under the GST structure applicable after 22 September 2025.
New GST Rate on Commercial Renting Services
| Type of Rental Service | SAC Code | New GST Rate (After 22 Sept 2025) | Old GST Rate (Before 22 Sept 2025) | ITC / Notes |
|---|---|---|---|---|
| Renting or leasing of non-residential property (offices, shops, showrooms) | 997212 | 18% | 18% | Eligible ITC may be available to the tenant when used for business, subject to GST conditions |
| Warehouses, godowns and cold storage used for commercial purposes | 997212 | 18% | 18% | Eligible ITC may be available subject to GST conditions |
| Co-working spaces and business centres | 997212, where applicable | 18% | 18% | GST treatment depends on the nature of the rental/licensing service |
| Renting to SEZ units or developers for authorised operations | 997212 | Zero-rated, subject to applicable conditions | Zero-rated, subject to applicable conditions | Zero-rating applies when supplied for authorised SEZ operations |
| Commercial property rented by unregistered landlord to GST-registered regular taxpayer | 997212 | 18% under RCM | 18% under RCM from 10 Oct 2024 | GST is payable by the registered recipient under Reverse Charge Mechanism |
| Commercial property rented by unregistered landlord to unregistered tenant | 997212 | GST depends on landlord’s registration liability | GST depends on landlord’s registration liability | RCM entry for unregistered landlord does not apply where the recipient is unregistered |
Type of Rental Service
SAC Code
New GST Rate (After 22 Sept 2025)
Old GST Rate (Before 22 Sept 2025)
ITC / Notes
Type of Rental Service
SAC Code
New GST Rate (After 22 Sept 2025)
Old GST Rate (Before 22 Sept 2025)
ITC / Notes
Type of Rental Service
SAC Code
New GST Rate (After 22 Sept 2025)
Old GST Rate (Before 22 Sept 2025)
ITC / Notes
Type of Rental Service
SAC Code
New GST Rate (After 22 Sept 2025)
Old GST Rate (Before 22 Sept 2025)
ITC / Notes
Type of Rental Service
SAC Code
New GST Rate (After 22 Sept 2025)
Old GST Rate (Before 22 Sept 2025)
ITC / Notes
Type of Rental Service
SAC Code
New GST Rate (After 22 Sept 2025)
Old GST Rate (Before 22 Sept 2025)
ITC / Notes
The gst on godown rent is generally 18% when a godown or warehouse is rented for commercial purposes under the applicable GST classification.
Charge Mechanism (Forward vs RCM)
| Lessor (Who Rents Out) | Lessee (Who Takes on Rent) | GST Rate | Charge Type |
|---|---|---|---|
| Private owner / landlord (GST-registered) | Business / tenant | 18% | Forward charge – landlord charges and pays GST |
| Private owner / landlord (unregistered) | GST-registered regular taxpayer | 18% | RCM – registered tenant pays GST under reverse charge |
| Private owner / landlord (unregistered) | Unregistered tenant | Depends on landlord’s GST registration liability | RCM does not apply merely because the landlord is unregistered |
| Central / State Government, UT or local authority | GST-registered person | 18% | RCM – registered recipient pays GST |
| Central / State Government, UT or local authority | Unregistered recipient | 18%, where taxable | Forward charge, unless a specific GST exemption applies |
Lessor (Who Rents Out)
Lessee (Who Takes on Rent)
GST Rate
Charge Type
Lessor (Who Rents Out)
Lessee (Who Takes on Rent)
GST Rate
Charge Type
Lessor (Who Rents Out)
Lessee (Who Takes on Rent)
GST Rate
Charge Type
Lessor (Who Rents Out)
Lessee (Who Takes on Rent)
GST Rate
Charge Type
Lessor (Who Rents Out)
Lessee (Who Takes on Rent)
GST Rate
Charge Type
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 GST-registered regular taxpayer rents commercial property from an unregistered landlord, the tenant is generally liable to pay GST under the Reverse Charge Mechanism (RCM).
- The tenant pays 18% GST directly to the Government.
- The tenant can claim eligible Input Tax Credit (ITC), subject to GST conditions.
- The unregistered landlord does not collect GST from the tenant.
This RCM rule applies to renting of commercial property by an unregistered person to a registered person, subject to applicable exclusions.
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How to Calculate GST on Commercial Rent
The gst on rent paid on commercial property is generally 18%.
For example:
- Monthly rent: ₹50,000
- GST under RCM @18%: ₹9,000
- Rent payable to landlord: ₹50,000
- GST payable separately to Government: ₹9,000
- Total cash outflow: ₹59,000
Where RCM applies, the tenant pays the rent to the landlord and deposits the GST separately with the Government.
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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 generally 18%, but the person liable to pay GST depends on the registration status of the landlord and tenant and the applicable charge mechanism.
Where a GST-registered landlord rents commercial property, GST is generally charged under the forward charge mechanism. Where an unregistered landlord rents commercial property to a GST-registered regular taxpayer, 18% GST may apply under the Reverse Charge Mechanism (RCM), subject to applicable GST provisions.
Whether it’s gst on shop rent, office rent, warehouse rent, or godown rent, correct classification, invoicing, and RCM compliance are important for avoiding penalties and maintaining proper GST records.
