Rent HSN Code: Understanding HSN Classifications for Rental Services
Rent is a common source of income for many businesses and property owners in India. Under GST, rent and rental services are treated as services and must be reported with the correct service HSN or SAC code so that tax is calculated and filed in the right way.
In this guide you will learn the main rent HSN code for rental services, how GST applies to rent income, what rates are used for different kinds of rental services and how businesses use these codes in GST returns.
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What Is the Rent HSN Code?
Under GST, services are classified using service accounting codes. These codes work like HSN codes for services and usually start with ninety nine.
Rent and rental services related to immovable property are mainly covered under the service heading 9972. This heading includes renting of commercial property, renting of office spaces, godowns and warehouses and some kinds of leasing of buildings for business use.
Other rental services like leasing of machinery and equipment are generally covered under heading 9973, which deals with leasing or rental services for goods rather than for land or buildings.
So when people talk about the rent HSN code in GST, they usually mean the service code 9972 for renting of immovable property and in some cases 9973 for renting and leasing of equipment and other goods.
Rent HSN Code Classification and GST Rates
Here are some commonly used HSN codes and GST rates for this category
| SECTION | |
|---|---|
| Section No | 99 |
| Section Title | Services (SAC) |
| Section Description | Services are classified under SAC (Service Accounting Code) and fall under Chapter 99 in GST rate notifications. |
| CHAPTER | |
|---|---|
| Chapter No | 99 |
| Chapter Title | Services |
| Chapter Description | Chapter 99 covers all services for GST classification (SAC). |
4 DIGIT SAC
| SAC Code | Service Title | Service Description | GST Rate |
|---|---|---|---|
| 9972 | Real estate services | Heading 9972 covers real estate services including rental or leasing services involving owned or leased property. | Varies (see 6-digit below) |
6 DIGIT SAC
| SAC Code | Service Title | Service Description | GST Rate |
|---|---|---|---|
| 997211 | Rental or leasing services involving own or leased residential property | Renting/leasing of residential property (houses, flats, etc.). | Nil (when used as residence); 18% under RCM when rented to a registered person (as per 18 Jul 2022 change, with later clarifications/exemptions). |
| 997212 | Rental or leasing services involving own or leased non-residential property | Renting/leasing of non-residential/commercial property (shops, offices, warehouses, etc.). | 18% |
* GST rates may vary based on the latest GST notifications
HSN Code for Rent Services and GST
Within heading 9972 there are more detailed service codes that distinguish between different types of rental services.
Commercial rent for shops, offices, factories and warehouses given for business use is covered under renting or leasing services involving owned or leased non residential property inside heading 9972. The detailed line identifies that the property is used for commercial or industrial purposes.
Residential rent collected for a house or flat used as a residence by a tenant is also a renting of immovable property service but in many cases it is treated as exempt from GST when conditions are met, such as when the tenant uses it for residential use and not for running a business establishment.
Rent for open land used for storage, parking or similar business activities also comes under rental services of immovable property and uses codes within heading 9972. The exact sub code depends on the use and description of the property.
Leasing of machinery, vehicles and equipment without transfer of ownership uses separate codes in heading 9973. For example, leasing of construction machinery or rental of plant and equipment without operator falls under these goods leasing codes rather than the immovable property codes.
Rent Income HSN Code and GST Implications
Rent income that is taxable under GST must be reported using the correct rent service code, such as 9972 for renting of commercial property . The GST rate and the way the income is shown in returns depend on this classification.
In the present structure, most taxable rental services of immovable property for business use are charged at 18% GST on the rent amount. This covers rent for shops, offices, warehouses and other commercial spaces when the landlord is a registered person and the service is taxable.
Residential rent for use as a residence is generally exempt from GST when given to a registered or unregistered person for personal residential use. However, when a residential property is rented to a business and used as an office or guest house, GST may apply at 18% under the relevant notifications.
Rent income from leasing of machinery and equipment under heading 9973 is also commonly taxed at 18%, unless a specific lower or higher rate is notified for a particular kind of leasing service.
Because rent income often forms a large part of revenue for property owners, correct use of the rent HSN code and the matching GST rate is important to avoid interest and penalties.
In GST returns , rent services are normally reported in the outward supplies tables with the relevant service code. When rent is exempt, it is shown under exempt or non taxable supplies with the same service code family. When rent is taxable, the same code is used in the taxable supplies section and in the place where tax is paid.
Businesses that take premises on rent and pay GST under forward charge or reverse charge can also claim input tax credit when the rent is used for business purposes and all conditions for credit are satisfied. The rent HSN code helps the tax officer understand the nature of the service when checking these credits.
Conclusion
The rent HSN code is an important part of GST compliance for both landlords and tenants. Rental services of immovable property for business use are generally classified under heading 9972, while leasing of machinery and equipment is usually covered under heading 9973.
When you classify rent income correctly, apply the correct GST rate, usually 18% for taxable rental services , and report it with the proper service code in your returns, you keep your GST records clean and reduce the risk of disputes. This makes GST compliance easier for property owners, leasing companies and businesses that take premises or equipment on rent.
