Introduction: This article discusses in details the taxability of renting of immovable property under GST.

Under GST, “renting of immovable property” is included in schedule II of CGST Act which defines it as the supply of services on which the GST rate is 18%.

However Entry no. 12 of exemption Notification no. 12/2017 dated 28.06.2017 exempts the services by way of renting of residential dwelling for use as a residence, meaning thereby that if the residential dwelling is leased out for commercial purposes then no exemption will apply and the rental from such residential property being leased out for commercial activity shall be taxable to GST.

So, “Services by way of renting of residential dwelling for use as residence” is exempted from the tax net.

However, it does not exempt renting of immovable property for commercial use.

Accordingly, the same is taxable at 18% GST.

Also, No GST is payable on Services by a person by way of renting of precincts of a religious place meant for general public. So the rate of GST payable on Services by a person by way of renting of precincts of a religious place meant for general public is nil rate.

However, the exemption shall not be applicable to renting of rooms where charges are Rs 1000/- or more per day, renting of premises, community halls, kalyanmandapam or open area, etc where charges are Rs. 10,000/- or more per day, and renting of shops or other spaces for business or commerce where charges are Rs 10,000/-or more per month.

Whether supply of renting of immovable property service  is Interstate or Intrastate ?

A very difficult question to answer!!!!!!!!!!!

Let us try to find out the answer.

In old era, Service tax was a Central Tax there was no State Tax on services.

But in GST era, the need to bifurcate the supply of services into interstate supply and intrastate supply has arisen such that the portion of state tax can go to the State of consumption of services.

For this purpose, we to need to evaluate  2 coordinates i.e.  ‘Place of Supply of Services’ [refer to section 12 of IGST Act] and second is the   location of supplier of services’ [refer to section 2(15) of IGST Act]

 If these two coordinates fall in two different States, then it is an interstate supply, and

 if both of these two coordinates  fall in the  same state  then it is an  intra-state (local) supply.

Now going by the above parameters let us evaluate what will happen to a case of rental from immovable property?

 Suppose, a landowner who is located in Gurgaon and owns an immovable commercial property in Bangalore which he has rented out there at Rs. 1,00,000/-.

 The question is whether the land owner will have to take GST registration in the State of Karnataka which is undisputedly the place of supply? Or, instead

 Whether the land owner can take GST registration in the State of Haryana which is his usual place of residence and treat it as interstate supply and accordingly charge IGST?

 For that, let us examine the above two co-ordinates.

A. Place of Supply

As per section 12(3) of IGST Act, the place of supply of service in relation to an immovable property shall be the location at which the immovable property is located.

Therefore, in this case, the place of supply is undisputedly Bangalore because the property is located thereat.

B. Location of supplier

For this the reference is invited to section 2(15) of IGST Act.

Section 2(15) contains four clauses (a),(b),(c),(d) to determine the location of the supplier of service.

Clause (a) says that location of a supplier means a place of business wherefrom the supply is made.

To fulfil this test, it is important to check whether the land owner is having any place of business in Bangalore just by having an immovable property thereat.

For the meaning of ‘place of business’ reference is invited to section 2(85) of CGST Act, which defines a ‘place of business’ wherefrom a business is ordinarily carried on and/or where a warehouse or go down or any other place for storage of goods is located and/or books of accounts are maintained and/or the business through agent is carried on.

Just having an immovable property doesn’t qualify this test as per section 2(85) of CGST Act, so in our example there is no ‘place of business’ of the landlord in Bangalore.

Now let us examine clause (b) of Sec 2(15) of IGST Act, whether the land lord is having fixed establishment in Bangalore and for that reference is directed to section 2(50) of CGST Act, wherein a fixed establishment is a place which is characterized by a sufficient degree of permanence and suitable structure in terms of human and technical resources.

This test of having human and technical resources is also not qualified by just having immovable property at Bangalore.

So Clause (b) has no application in our case.

Now let us examine Clause (c) of Sec 2(15) of IGST Act. It pertains to a supply of service from more than one establishment and thus has no application in our case.

Now comes the final test i.e. residual clause (d) which says that:_

in the absence of clause (a),(b),(c) being applicable, the location of usual place of residence shall be the location of the supplier of services within the meaning of clause (d) of sec 2(15) of IGST Act.

Conclusion

Therefore in our example

1. the location of the landlord will be Gurgaon, while

2. the place of supply will be Bangalore ,and

3. hence as per section 7 of IGST Act this will be an interstate supply subject to IGST, and

4. So, there is no need for the landlord to take GST registration in the State of Karnataka.

The author is a practising CA and is registered Insolvency Professional. He can be reached at cavinodchaurasia@gmail.com, Mob. +91 9953587496.

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53 Comments

  1. Vedant Khemani says:

    Sir I have referred bare text of IGST ACT to check location of supplier , and the bare text of sec 2(15) c says :
    (c) where a supply is made from more than one establishment, whether the
    place of business or fixed establishment, the location of the establishment most
    directly concerned with the provisions of the supply
    (copied exact terms from act)
    Hence the location of establishment most directly concerned with the establishment will be the place where the immovable property is situated and is rented out , hence LOS and POS being in the same state, the owner should obtain registration in that respective State and charge CGST and SGST
    Further, if he doesn’t obtain registration of that state, then for any repair/maintainance,etc services supplied by any other vendor, the vendor will charge CGST/SGST for that state and the owner would not be able to take credit for the same

  2. Manish Gajra says:

    I am dealing in automobile spare parts and registered under GST composition scheme. I have income from shop rent RS 150000. Is that means this is chargeable under GST 18 % or under income tax

  3. Divjot singh says:

    Sir my business is renting immovable property and i have already register in GST act now i want to construction new property for Renting so Can i take input Credit on this New Construction

  4. girish says:

    have a property in bangalore let out to an Educational institution ( registered as charitable trust) and they are running a women hostel facility on the same. do i need to charge GST on rent, where as they claim We do not collect GST as we are exempted from GST so we do not require to pay.

  5. NARESH CHANDER says:

    Sir, I have a commercial property in Gurgaon on rent . I have gst registration in New Delhi. I provide bill as rent + 18% igst but deposited the same as 9% sgst+9% cgst. Please tell me cai I adjust the deposited sgst+cgst in igst.

  6. S.NARENDER SINGH says:

    Sir, i have letout my commercial property and getting rent around 35 lakhs on which the tanent deduct TDS and i have taken gst registration to collect gst on rent from my tenent and deposit the same in cgst and sgst, now my doubt which form i have to fill for my income tax return previously i use to fill itr 2, but now i have to give my gst registration number and rentcollected detai, if i feed it in generla information then it attracts itr3…

  7. Kushal Wadhwani says:

    Hello,
    I am a partner in a partnership firm and our turnover is much more than 20 lakhs and thus my personal income is also more than 20. Now, I am renting out a property for 1 lakh a month. I don’t have a personal gst number. Now whether I am exempted from gst as my total rental income is less than 20 lakhs ? Or do I have to take separate personal gst number and pay gst on rent ? Also can I club this rental income in my firm ?? Thanks

  8. Prashant vats says:

    Prashant Vats:
    One property in gurgaon and one property in punjab, both are seperately registered under gst. Gurgaon propery has only ITC and not having any outward tax liability and punjab propery not have any ITC and it has only outward tax liability. Is there any way that ITC of gurgaon property used against punjab property tax liability

    Pls suggest

    1. Amber says:

      No. You can not ITC of one location to setoff against liability of another location as GST required state registration and by doing so there will be a loss to one state’s revenue.

  9. Tom says:

    Sir, I have a commercial property in Andhra. A company from Bangalore has taken space for a short term and demanding for IGST bill. How did this to be treated. If i raise a IGST bill to tenant, do i need to pay separately CGST & IGST. Please confirm.

  10. ANIL180675 says:

    Sir my business is renting immovable property and i have already register in GST act now i want to construction new property for Renting so Can i take input Credit on this New Construction

  11. Supriya Chatterjee says:

    I beg to differ with the stand taken in the article. Provision of Sec. 22 of the CGST Act prescribes various conditions under which one needs to get registered. Accordingly, every supplier shall be liable to be registered ‘in the State/UT from where he makes a taxable supply of goods/service’ if the turnover exceeds the threshold limit. Hence, in the example the service of renting of immovable property is being provided from the state of Karnataka(Bangalore). Hence, the supplier has to obtain registration in that state. The definition of ‘location of the supplier’ and the ‘place of supply’ is only to decided whether the supply is inter-state or intra-state. It appears to be improper to user the said definition to decide the requirement to register.

    1. Divakar says:

      I too differ from the opinion expressed by the author.

      Earlier there were place of provision of services rules under service tax. The almost same provisions are brought into the GST law. ICIAI has come out with an analysis of such rules, wherein it clearly stated that, in case of immovable property, place of provision of service shall be the place of the immovable property. This indicates that the place of taxable supply is the location of the immovable property. Since place of provision of service and place of recipient are same, the tax applicable in case of immovable property is CGST and SGST/UGST. As per Sec 22 of CGST Act, there is registration requirement for the service provider, in all the states, where he is providing service.

      In my opinion, while writing and publishing articles we need to take, some extra care, else there will be confusions and some of the tax payers are put to hardship, if they believe such interpretation of law.

  12. Shashank says:

    My aunt who was registered under service tax and got migrated to n registered under gst. She is earning rent and on that she has to charge gstThe leasee is also registered under gstBut by mistake the leasee, treated the leasor as unregistered person n hence the leasee continued to pay gst on reverse charge basis n took credit for the sameAs my client is NRI so now I have to file her returns since July 2017 n now I have come to know about this mistake. Now the point is, while filing her return she will be liable to pay gst on the rent earned n the same should have been recovered from the leasee. The leasee is denying to pay
    So what should be done.

  13. navjot says:

    Our trust is religious , so there is RcM is applicable if we are given shop forrent for commercial purpose ,and retuen of gst to be filed .please reply

  14. Jitendra Gaur says:

    i am nri and previously lived in haryana my rental income from commercial property is 10 lakh annum is it attract gst and whether gst rehistration is required.

  15. Deepak Sharma says:

    Should GST be charged in Rental invoice from Company to Company and both are registered under GST.
    But Rental Amount is Rs.8,500/- Per month only means Rs.1,02,000/- Per year.
    Please suggest

  16. deepanshu bansal says:

    Sir, My uncle has a property which is given on rent @ 50,000/- per month for commercial purpose and the tenant had deduct TDS @10% and GST @18%. My uncle can claim back the TDS through the income tax filling but how to claim back the GST which is already deducted by Tenant under RCM. My uncle total taxable service is Rs 6,00,000/- so he don’t need to register under GST but how to claim back the GST which is deducted under RCM by tenant?

    1. Prashansa says:

      Hi Deepenshu,

      There is no clause in GST to deduct GST under RCM. If registered person received services from an unregistered person, GST shall be paid by registered person and accordingly he can claim that GST amount paid as input in his return. Tenant can’t deduct GST amount from the rent paid by him.

  17. PRAKASH JOSHI says:

    Dear Sir,
    Suppose a company take a house on lease part of which is used for ofiice and partly for residence of directors and executives.Whether the payment of rent will attract GST on full or partly to the extent sued for residential purpose(suppose there are two leases)

    Secondly, having paid the GST on above, can the company claim input credit on whole.

    Please answer the abovee questions.

    Thanks

  18. UMESH KHANDELWAL says:

    Sir I am a Shop Keeper, and I pay 15000 x 2 rent P.M. in two different name through current a/c. My GST registration is in Kolkata, and I pay rent to an unregistered individual person, in that case, what is my GST liability ?

  19. Ashfaq Hussain says:

    Sir, I Ashfaq Hussain resident from gulbarga Karnataka state have leased a property on rent in gulbarga, to a gold loan company since about six years and receive a monthly rent of about RS 30000 (thirty thousand) yearly about RS 360000(three lakh and sixty thousand) with no other source of income , the company on rent deducts 10% TDS on rent which I get refunded on filing income tax return , so I am not an income tax payee also. I have never paid service tax ever because my total income never crossed previous service tax limit of RS 1000000(ten lakhs).
    Now after GST the gold loan company says it will deduct 18% GST and 10% TDS , how can they deduct GST when the threshold limit is increased to RS 2000000(twenty lakhs) per annum? .how can I be liable for GST when my total income from all sources is below RS 400000(four lakhs) per annum?
    Sir , please do reply this at the earliest , as I am very confused on this….

  20. Sunil Chowdhary says:

    I live in Gujarat and do business from my office in Mumbai. Will my office premises in Mumbai qualify to be my place of business if I apply for registration. In case I give part of my office premises on rent, can I do it with the same registration or do I have to take registration at my house in Gujarat for the rental portion of my turnover.

  21. S Muralidhar says:

    Sir, as per sec 22(1) of CGST Act, every supplier shall be liable to be registered under this Act in the state from where he makes a taxable supply of goods or services. As per sec 12 of IGST Act, the place of supply of service in relation to immovable property shall be the place where the property is located. Reading these two sections it appears that the landlord has to be registered in the place where his property is located.

  22. Sunil says:

    I want to give my property on rent to government agriculture office
    in this case GST is applicable or not
    if applicable
    then who will pay the GST
    Government agriculture office or Me

  23. subhashini says:

    I have a premises in bangalore & I given to rent to a company for Rs. 300000 per month .
    If gst registration is applicable or not .

    Please tell me sir

  24. Suresh says:

    Sir company is operating a guest house in gurgaon a mumbai base registered company take a room in guest house. what will guest house charge either IGST or SGST & CGST.

  25. E VEERESHWAR RAO says:

    Sir
    We as a company, given rent to another company for commercial purpose, we are getting a monthly rent of rs.1 lac per month, now my question is GST Applicable for this and what rate we charge, if we charge shall we get input benefit again or not.

    kindly clarify sir.

    regards

    veeru

  26. Kishor Mehta says:

    Company, Registered in Maharashtra only, has taken on Rent, from unregistered Individual Person residing in Gujarat , a Office premises situated in Gujarat , for use as pure marketing office and the said Company is not having any Supply of Goods or Services from Gujarat Office, be liable to pay any Tax under section 9(4) on Reverse charge or under any other provision . The said Company is not Registered in Gujarat

  27. Ravi says:

    Sir whether the landlord will have to take registration in Gst in haryana against renting of property situated at bangalore if total annual rent is 12 lac

  28. Ashish kumar Goel says:

    What will be the scenario if we provide training services and have a H.O. in Gurgaon, most of our services are exempt.

    we have taken a Hostel on rent in Rajasthan and landlord is not registered under GST, However the Supply of services by us in Rajasthan is fully
    exempt.

    Whether We require to take registeration and pay GST under Reverse Charge.??

  29. pranav jain says:

    While this interpretation has been justified by you but the govt’s response is otherwise.
    You may please refer the Tweet 03.06.2017 from government on its twitter handle @askGST_GoI.

    The same is reproduced for your ready reference

    03/06/2017
    Q: We are registered in Punjab in textile, having let out property in Mumbai. Whether we require registration in Maharashtra also.

    ANS FROM @askGST_GoI: Yes, Taxable supply of renting is being provided from Maharashtra, hence registration required in Maharashtra.

    Now this article of yours is presenting an altogether different view, though your view will deter the hardship to many landlords who have properties in different states and are the resident of another state.
    Still the confusion prevails

  30. ANAND MASHROO says:

    COMPANY HAS PAID 40000 RENT PER MONTH FOR GUEST HOUSE PURPOSE. IS GST APPLICABLE TO COMPANY UNDER UNREGISTERED DEALER PURCHASE.

  31. RAJARAO D says:

    renting of shops or other spaces for business or commerce where charges are Rs 10,000/-or more per month. If Total Receipts for the year below 20 lakhs does he exempt from GST

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