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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 54th meeting dated 9th 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.

GST on Renting Immovable Property Rules and Exemptions

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 28th June, 2017, whether the service recipient is registered or not.

But from 18th July, 2022 vide Notification No. 04/2022 – Central Tax Dated 13th 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 –

Location of landlord Location of property Location of tenant CGST/SGST or IGST
Jaipur Jaipur Jaipur CGST/SGST
Jaipur Jaipur Hyderabad CGST/SGST
Jaipur Bangalore Jaipur IGST
Jaipur Bangalore Pune IGST

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.

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6 Comments

  1. Naresh Kumar says:

    if property give on rent for commercial use by Landlord ( Un – registered Person) to Tenant a Registered In GST then GST payable liability witch party against GST RCM rule as per current GSTRule..

  2. Parag Prakash Vardam says:

    If a registered Firm takes on rent a commercial shop from an un-registered owner then is GST applicable on RCM basis? means the registered firm have to pay GST under RCM basis?

    1. ANKITA NATANI says:

      If the tenant is registered and the landlord is unregistered and property is for commercial use then RCM will be applicable and tenant have to pay RCM on it.

  3. Muhammad Arshad says:

    Hi
    How come renting out an immovable property is treated as rendering of service? It is simply allowing the use of an asset. Have none of you challenged this levy in a court of law?

  4. kollipara sundaraiah says:

    A Doctor non gst registered (un registered)own commercial property (hospital) rent to another gst non registered(Un registered) person rs:10 lacs per month basis.
    Question:
    Gst tax payble for tenant or landlord above transactions two person un registered in gst act.
    2.Rent for rcm and fcm applicable and gst registration compuslory or not.

    1. ANKITA NATANI says:

      In GST Act, renting of immovable property is considered as supply of services. If a person crosses the threshold limit which is 40 lakh in case of supply of goods and 20 lakh in case of supply of services then GST registration is mandatory.

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