GST on Rent: When and Where It Applies
Renting property is common across residential and commercial sectors in India. But when does GST apply to rent? Is there GST on house rent or only for commercial use? In this blog, we’ll break down the rent gst rate, when GST applies, and how it affects both landlords and tenants.
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Is Rent Taxable Under GST?
Under GST law, renting out property is considered a supply of service, which can attract GST — but not always.
GST only applies to:
- Commercial properties rented for business or official use
- Residential properties rented for commercial purposes
- Properties rented to registered businesses
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GST Rate on Rent
The gst rate on rent for taxable rentals is 18%. This applies to:
- Office spaces
- Shops
- Warehouses
- Residential units used as offices
If the rent is collected from a GST-registered business or company, and the property is used for commercial purposes, GST is applicable.
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GST on House Rent
Here’s the important distinction:
| Type of Rental | GST Applicable? | GST Rate |
|---|---|---|
| Residential property for personal use | No | Nil |
| Residential property used for business | Yes | 18% |
| Commercial property for any use | Yes | 18% |
So, gst on house rent is not applicable when it is used solely for residential purposes.
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When Does a Landlord Need to Register for GST?
If the total annual rental income exceeds ₹20 lakh (₹10 lakh in some states), the landlord is required to:
- Register under GST
- Charge 18% GST on rent (where applicable)
- Issue tax invoices
- File GST returns regularly
Reverse Charge Mechanism (RCM) on Rent
If a GST-registered business rents a property from an unregistered landlord, then GST is payable by the tenant under the Reverse Charge Mechanism.
The tenant pays the tax directly to the government. This applies mainly to commercial rent situations, not personal rentals.
Input Tax Credit on Rent
Tenants (usually businesses) who pay GST on rent can claim Input Tax Credit, provided:
- They are registered under GST
- The rented premises are used for business
- The GST invoice is correctly issued
This helps reduce the overall GST burden for businesses.
As a Chartered Accountant with over 12 years of experience, I am not only skilled in my profession but also passionate about writing. I specialize in producing insightful content on topics like GST, accounts payable, and income tax, confidently delivering valuable information that engages and informs my audience.
Frequently Asked Questions (FAQs)
- What is the rent GST rate for commercial property?The standard GST rate on commercial rent is 18%.
- Is GST on house rent applicable for residential tenants?No, if a property is rented solely for residential use, it is exempt from GST.
- Does a landlord have to register under GST?Only if the landlord’s total rental income exceeds ₹20 lakh per year across all properties.
- Can a tenant claim GST paid on rent?Yes, if the tenant is a GST-registered business and the rented property is used for business purposes.
- Does RCM apply to residential rent?No. Reverse Charge Mechanism (RCM) applies only to commercial property rented by a GST-registered tenant from an unregistered landlord.
