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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44 responses to “Renting of immovable property under GST”

  1. Amber says:

    Will I be liable to pay GST on rent of property on RCM basis if the property is located is outside India?

  2. 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

    • 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.

  3. sampada says:

    I HAVE 1 FLAT AT THANE.
    I RENTED IT ONE COMPANY FOR MARKETING PERSON RESIDENT.
    CAN I CHARGE GST?

  4. 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.

  5. 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

  6. 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.

    • 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.

  7. srav says:

    i am leaving in vizag ,i doing construction business in vizag,but i have rental commercial house at hyd ..can i rises igst invoice

  8. 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.

  9. Renny says:

    Our co. registered in Calcutta and if we have to rent a office in Bangalore, on the rent IGST 18% paid in Bangalore can we get ITC?

  10. 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

  11. Jitendra Gaur says:

    for nri is gst registration necessary for rental income.

  12. 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.

  13. Rajiv Walia says:

    GST on religious property given on leasehold basis for 99 years

  14. 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

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