Is GST Applicable on Rent of Commercial Property?
Yes. Renting out commercial property (offices, shops, warehouses, godowns) is classified as a supply of service under the GST Act. The applicable rate is 18% GST (9% CGST + 9% SGST for intra-state, or 18% IGST for inter-state).
This applies when the landlord's aggregate annual turnover exceeds ₹20 lakhs (₹10 lakhs for special category states). Below this threshold, GST registration is not mandatory.
Key GST Rules for Commercial Rent
| GST Rate | 18% on commercial property rent |
| SAC Code | 997212 (Rental services of commercial property) |
| Registration Threshold | ₹20 lakhs aggregate turnover (₹10 lakhs for special category states) |
| ITC Available? | Yes — tenant can claim ITC on rent paid |
| Residential Rent | Exempt from GST (with exceptions) |
When is GST NOT Applicable on Rent?
- Residential property rented for personal use: Exempt from GST under Notification 12/2017
- Landlord's turnover below ₹20 lakhs: GST registration and collection is not mandatory
- Government property used for non-commercial purposes: May be exempt
The 2022 Change: Residential Property to Registered Businesses
From 18th July 2022, when a GST-registered business rents a residential property, GST applies under the Reverse Charge Mechanism (RCM). The tenant (business) must pay 18% GST, not the landlord. This was a significant change that caught many businesses off guard.
How to Calculate GST on Rent
Example 1: Simple Commercial Rent
- Monthly rent: ₹1,00,000
- GST at 18%: ₹18,000
- Total invoice amount: ₹1,18,000
- Tenant pays ₹1,18,000 to landlord
- Tenant claims ₹18,000 as ITC in their GST return
Example 2: GST + TDS on Same Rent
When both GST and TDS apply on the same rent payment:
- Monthly rent: ₹1,00,000
- GST at 18%: ₹18,000 (total invoice = ₹1,18,000)
- TDS at 10% (Section 194I): Calculated on ₹1,00,000 (rent excluding GST, if shown separately) = ₹10,000
- Net payment to landlord: ₹1,18,000 - ₹10,000 = ₹1,08,000
Important: As per CBDT Circular No. 1/2014, TDS is calculated on the rent amount excluding GST, provided GST is shown separately on the invoice.
Input Tax Credit (ITC) on Rent
One of the biggest advantages of GST on commercial rent is that tenants can claim Input Tax Credit. This means the 18% GST you pay on rent reduces your GST output liability.
Conditions for Claiming ITC on Rent
- You must be a GST-registered business
- The landlord must be GST-registered and issue a proper tax invoice
- The rent must be used for business purposes
- You must file your GSTR-3B return reflecting the ITC
- The landlord must report the transaction in their GSTR-1
Reverse Charge Mechanism (RCM) on Rent
RCM applies in specific scenarios where the tenant is responsible for paying GST directly to the government, rather than the landlord collecting it:
- When a GST-registered business rents a residential property (since July 2022)
- When rent is paid to a government body or local authority
Under RCM, the tenant pays GST under their own GSTIN, can claim ITC on the same, and the landlord does not need to collect GST.
GST Invoicing for Rent
A proper GST invoice for rent must include:
- Landlord's name, address, and GSTIN
- Tenant's name, address, and GSTIN
- SAC Code: 997212
- Rent amount (taxable value)
- GST breakdown (CGST + SGST or IGST)
- Total invoice value
- Place of supply
How MyProperty Handles GST on Rent
MyProperty automatically generates GST-compliant invoices for every rent payment. The system:
- Calculates GST at the configured rate (default 18% for commercial)
- Separates CGST/SGST or applies IGST based on place of supply
- Tracks TDS alongside GST without double-counting
- Generates reports for GSTR-1 and GSTR-3B filing
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