Summary: Under GST, the taxability of leasing residential and commercial properties varies based on the recipient’s registration status. Before 18th July 2022, renting residential dwellings for residential use was exempt from GST. After this date, the exemption was removed for registered recipients, and the reverse charge mechanism (RCM) applied, taxing the rental at 18%. The 54th GST Council meeting in September 2024 recommended that leasing commercial properties by unregistered persons to registered recipients also fall under RCM to prevent revenue leakage. Leasing residential properties remains exempt if rented to unregistered individuals for personal use, while registered recipients must bear GST at 18% under RCM. Commercial property leases to registered parties, whether from registered or unregistered owners, attract 18% GST, with the reverse charge applying if the owner is unregistered. Input tax credit (ITC) is available for recipients in applicable cases. These changes reflect evolving GST norms to better regulate rental taxation.
Renting of residential dwelling for use as a residence was exempt prior to 18.07.2022 and w.e.f. 18.07.2022, the exemption was removed and the same was made liable to tax under the reverse charge mechanism if the service recipient is registered under GST.
The 54th GST Council meeting held on 09.09.2024 recommended that renting of commercial property by unregistered persons to registered persons should be brought under Reverse Charge Mechanism to prevent revenue leakage.
The following tables explain the taxability of leasing of residential / commercial property.
Taxability of Leasing of Residential Property under GST
| Particulars | To Unregistered persons | To Registered Persons | ||
| Taxability | Exempt | Upto 17.07.2022 | w.e.f. 18.07.2022 | w.e.f. 01.01.2023 |
| Exempt | Yes; @ 18% under Reverse Charge Mechanism | Yes; @ 18% under Reverse Charge Mechanism | ||
| Input Tax Credit (ITC) | NA | NA | ITC can be claimed by recipient | ITC can be claimed by recipient |
| Authority / Notification No. | Notification No. 12/2017-CT (Rate) dated 28.06.2017 | Notification No. 12/2017 -CT (Rate) dated 28.06.2017 | Notification No. 4/2022-CT (Rate) dated 13.07.2022; | Notification No. 15/2022-CT (Rate) dated 30.12.2022 |
| Conditions | NIL | NIL | -Recipient to be registered
-Supplier to be unregistered |
-No GST if residential accommodation rented to proprietor in individual capacity for residential use.
-Tax @ 18% on reverse charge if used for proprietary concern. |
Taxability of Leasing of Commercial Property under GST
| Owner | Tenant | Taxability | Remarks |
| Unregistered | Unregistered | Not taxable | – |
| Registered | Unregistered | Taxable | Tax to be paid under Forward charge mechanism |
| Registered | Registered | Taxable | Tax to be paid under Forward charge mechanism |
| Unregistered | Registered | Taxable | Tax to be paid under Reverse charge mechanism* |
* Recommendation of 53rd GST Council meeting (Date yet to be notified)
Author Bio
Whether lease rental on Mining lease will be leviable to GST
CA Om Prakash Jain s/o J.K.Jain, Jaipur
Tel 9414300730/9462749040/0141-3584043
What is the applicable date for raising the RCM invoices for commercial rent payments??
Madam,
1.What is the difference between leasing of immovable property and leasing of mines so far as levying of GST is concerned.
2.Whether GST can be levied on leasing of mines.
CA Om Prakash jain s/o J.K.Jain, Jaipur
Tel 9414300730/9462749040/0141-3584043