Goods and Services Tax (GST)
applies to various types of rental income in India, including residential and commercial property leases. However, the GST rules differ based on property type, tenant type, and rental purpose.
In this blog, we will cover:
✅ GST on residential property rent
✅ GST on commercial property rent
✅ How to calculate GST on rental income
✅ GST exemptions and compliance requirements
1. GST on Residential Property Rent RentInvoice.in
Is GST Applicable on Residential Property Rent?
No, renting residential property for residential purposes is exempt from GST.
However, from July 18, 2022, GST applies if a residential property is rented to a GST-registered business entity.
Key GST Rules for Residential Property Rent:
| Scenario | GST Applicability | GST Rate |
|---|
| Renting a house for residential use | ❌ No GST | 0% |
| Renting a house to a GST-registered business | ✅ GST applicable | 18% |
| Renting a house to an unregistered individual | ❌ No GST | 0% |
Who Pays the GST on Residential Property Rent?
If a GST-registered business rents a residential property, the tenant (business) must pay GST under the Reverse Charge Mechanism (RCM) and file it in their GST returns. The landlord is not required to charge GST.
2. GST on Commercial Property Rent
Is GST Applicable on Commercial Property Rent? BestBill.in
Yes, renting commercial property (offices, shops, warehouses, etc.) is taxable under GST at 18%.
Key GST Rules for Commercial Property Rent:
| Scenario | GST Applicability | GST Rate |
|---|
| Renting office space, shops, warehouses, etc. | ✅ Yes | 18% |
| Renting to GST-registered business | ✅ Yes | 18% |
| Renting to an unregistered business/individual | ✅ Yes | 18% |
Who Pays the GST on Commercial Property Rent?
- The landlord must charge GST on rent and file GST returns.
- If annual rental income exceeds ₹20 lakh (₹10 lakh in some states), GST registration is mandatory.
- Tenants can claim Input Tax Credit (ITC) if the property is used for business.
3. How to Calculate GST on Rental Income?
GST Calculation Formula:
Total Rent (per month)×18100=GST Amount\text{Total Rent (per month)} \times \frac{18}{100} = \text{GST Amount}Total Rent (per month)×10018=GST Amount
Example Calculations:
Example 1: Residential Property (No GST for personal use)
- Monthly rent: ₹30,000
- GST rate: ❌ No GST
- Total amount payable: ₹30,000
Example 2: Residential Property Rented to a Business (GST under RCM)
- Monthly rent: ₹50,000
- GST rate: 18%
- GST Amount: ₹50,000 × 18% = ₹9,000
- Who pays GST? The business tenant under RCM.
Example 3: Commercial Property Rent (GST Applicable)
- Monthly rent: ₹1,00,000
- GST rate: 18%
- GST Amount: ₹1,00,000 × 18% = ₹18,000
- Total rent payable: ₹1,18,000 (₹1,00,000 + ₹18,000 GST)
4. GST Exemptions on Property Rent
✅ No GST on residential rent for personal use.
✅ No GST if total rental income is below ₹20 lakh annually.
✅ No GST on rent paid by the government or charitable trusts for public welfare purposes.
✅ No GST on agricultural land leasing for farming activities.
5. How to File GST for Rental Income?
1️⃣ Obtain GST registration if rental income exceeds ₹20 lakh annually.
2️⃣ Issue GST invoices with details of rent, GST amount, and tax breakup.
3️⃣ File GST returns (GSTR-3B & GSTR-1) every month or quarter.
4️⃣ Pay GST to the government through the GST portal.