Summary: The GST treatment of renting properties in India varies between residential and commercial contexts. From 1st July 2017 to 17th July 2022, renting residential property was exempt from GST under Notification 12/2017-Central Tax, regardless of whether the landlord or tenant was registered. However, starting 18th July 2022, if the tenant is registered under GST, the renting becomes taxable, with the tenant responsible for paying 18% GST under the Reverse Charge Mechanism (RCM). Conversely, if the tenant is unregistered, renting remains exempt. For commercial properties, GST is consistently applicable at 18% whenever the landlord is registered, and the landlord is responsible for charging and remitting the GST under the forward charge mechanism. If the landlord is unregistered, the tenant must pay GST under RCM, effective from 10th October 2024. This distinction highlights the different approaches to taxation based on the property’s nature and the registration status of the parties involved.
Case 1: GST on Renting of Residential Property
| Particulars | 1st July 2017 to 17th July 2022 | 18th July 2022 Onwards |
|---|---|---|
| Conditions for GST exemption | – Renting must be for residential purposes only. | – Renting must be for residential purposes, and the tenant must be unregistered under GST. |
| Where both landlord and tenant are registered | Exempt (Notification 12/2017-Central Tax) | GST @18% applicable, payable by tenant under Reverse Charge Mechanism (RCM). |
| Where only the tenant is registered | Exempt (Notification 12/2017-Central Tax) | GST @18% applicable, payable by tenant under RCM. |
| Where the tenant is unregistered | Exempt (Notification 12/2017-Central Tax) | Exempt from GST |
| If residential dwelling is used for commercial purposes | GST @18% applicable under forward charge | GST @18% applicable under forward charge |
Clarifications for Case 1:
- GST Position from 1st July 2017 to 17th July 2022:
- Renting of residential property for use as a residence was exempt from GST under Notification 12/2017-Central Tax (Rate) dated 28th June 2017.
- GST Position from 18th July 2022 onwards:
- Renting of residential properties became taxable if the tenant is a registered person (Notification 04/2022-Central Tax (Rate) dated 13th July 2022).
- The GST is payable by the registered tenant under RCM (Notification 05/2022-Central Tax (Rate) dated 13th July 2022).
- If the tenant is unregistered, then no GST is applicable.
Case 2: GST on Renting of Commercial Properties
| Particulars | GST Applicability on Renting of Commercial Property |
|---|---|
| Landlord is registered | GST @18% applicable and payable by the landlord under forward charge. |
| Landlord is not registered | GST @ 18% by Tenant under Reverse Charge w.e.f. 10th October 2024. |
| If the property is used for commercial purposes | GST @18% is applicable regardless of the nature of use by the tenant. |
Clarifications for Case 2:
- For renting of commercial properties, GST is always applicable at 18%, provided the landlord is a registered person.
- The landlord is required to charge GST on the rent and remit it to the government under the forward charge mechanism.
- If the landlord is not registered under GST (because the aggregate turnover does not exceed the threshold limit), then GST is to be paid by tenant under Reverse Charge Mechanism as per Notification No 09/2024 – Central Tax (Rate) dated 08th October 2024, and the landlord does not need to charge GST.
Author Bio
sir,
Why renting of immovable property is not considered as ‘benefit arising out of land’.
Ca Om Prakash Jain s/o J.K.Jain Jaipur
Tel 9414300730/9462749040/0141-3584043
Under the CGST Act, 2017, the renting of immovable property is not considered a “benefit arising out of land” but rather as a service. Here’s why:
Nature of Supply: Under the GST framework, renting of immovable property is classified as a “supply of service” rather than a benefit or ownership transfer. The tax is applied to the service provided, i.e., allowing the tenant to use the property, rather than any transfer of rights in the land itself.
Definition of Service: As per Section 2(102) of the CGST Act, services include activities that do not involve a transfer of goods, like the renting of immovable property. It’s recognized as a service because the tenant gains temporary usage rights, not ownership or long-term benefit, and thus GST applies to the service component.
Scope of ‘Benefit Arising Out of Land’: The term “benefit arising out of land” is generally used to refer to profits or rights deriving directly from the land itself, such as rights to natural resources or profits from agricultural land. Renting doesn’t provide a benefit in the form of profit directly from land ownership but merely temporary usage, making it distinct under the GST provisions.
GST Applicability: GST applies to the renting of property because it is seen as a taxable supply under the service category. This is unlike stamp duty or other land-related taxes that apply to ownership or transfer rights in immovable property.
Sir,
Could you please clarify about the GST RCM applicability on renting of commercial property in if we have paid rents on 01-10-2024 for the month of Oct-2024.
We are in confusion since its made effective from 10-10-2024.
Hi Vinay,
In such cases, we need to determine Time of Supply:
– Time of Supply for Services (Section 13 of CGST Act):
The time of supply is determined based on:
The date of issue of the invoice, or
The date of payment, whichever is earlier.
– Applicability of RCM:
If the payment for the rent is made before the effective date of the RCM notification (10th October 2024), the transaction is governed by the provisions applicable at the time of payment
Since the payment for October’s rent was made on 1st October 2024, before the RCM became applicable, the transaction would not attract RCM.