GST on Renting Immovable Property: Rules and Exemptions

Summary: Renting immovable property is considered a supply of services under GST, attracting an 18% tax. Commercial property rentals are always subject to GST, regardless of whether the tenant is registered. However, from October 1, 2024, if an unregistered landlord rents commercial property to a registered tenant, the Reverse Charge Mechanism (RCM) applies, where the tenant must pay the GST. For residential properties, prior to July 18, 2022, renting for residential purposes was GST-exempt. Now, if a registered person rents a residential property for personal use, GST is applicable under RCM, making the tenant responsible for paying the tax. GST is not levied if the property is rented to an unregistered person for residential purposes or if a registered person uses it for their own residence. For intra-state rentals, CGST and SGST are applicable, while IGST is charged for inter-state rentals, based on the property’s location rather than the tenant’s. Exemptions apply for properties managed by charitable or religious trusts if rental rates for rooms, shops, or community spaces fall below specified thresholds.

When you give immovable property on rent then it will be considered as supply of services under GST law and GST will be applicable on it @18%.

Now the immovable property can be commercial or residential.

1. Renting of commercial property

When a GST registered person gives a commercial property on rent to any person whether registered or unregistered then GST is applicable on it. The service recipient is registered or not is not important.

But in GST Council 54^th meeting dated 9^th Sep 2024, now if the landlord is unregistered and rent commercial property to registered person then Reverse Charge Mechanism (RCM) will be applicable. This will be applicable from 01.10.2024.

2. Renting of residential property

Earlier renting of residential property for residential purposes was exempted from GST vide Notification No. 12/2017 – Central Tax Dated 28^th June, 2017, whether the service recipient is registered or not.

But from 18^th July, 2022 vide Notification No. 04/2022 – Central Tax Dated 13^th July, 2022, if a residential property is given to registered person for residence purpose, GST is leviable. In this case GST will be applicable on Reverse Charge basis, it means that the service recipient (tenant) is required to pay tax to the government.

Note – In following cases GST is not levied.

i. When residential property is given on rent for residential purposes to unregistered person.

ii. When the registered person uses the property for own residential purposes.

Whether CGST/SGST will be levy or IGST?

If it is intra state supply of services then CGST and SGST will be levied and for inter state supply IGST will be charged.

Place of immovable property decides the place of supply. If location of landlord and place of supply of immovable property is within same state then CGST and SGST will be charged and if location of landlord and place of supply of immovable property is in different state then IGST will be charged. Here, location of tenant is not important.

Let understand this more clearly with the help of example –

When GST is not charged on renting of property for commercial purposes.

If a registered charitable trust or a religious trust owns and manages a religious place meant for the public, it is exempt from GST if it falls in any criteria.

i. The rent of these rooms is less than Rs. 1000 per day.

ii. The rent of shops and other spaces for business is less than Rs. 10,000 per month.

iii. The rent of community halls or any open area is less than Rs. 10,000 per day.