GST Applicability in Case of Renting of Immovable Property
Renting of immovable property is classified as a 'Supply of Service' under Schedule II of the Central Goods and Services Tax (CGST) Act, 2017. Over recent years, significant amendments—especially regarding Reverse Charge Mechanism (RCM) applicability on commercial and residential renting—have created compliance complexities for both landlords and tenants.
Here is a simplified, comprehensive matrix explaining when GST is payable, who pays it (Forward Charge vs. Reverse Charge), Place of Supply rules, and statutory exemptions.
1. Master Matrix: GST Applicability & Charge Mechanism
| Landlord Status | Property Type | Tenant Status | Taxability & Rate | Payment Mechanism |
|---|---|---|---|---|
| Registered | Commercial Property | Any Person (Reg / Unreg) | Taxable @ 18% | Forward Charge (Landlord collects & pays) |
| Unregistered | Commercial Property | Registered Person | Taxable @ 18% (w.e.f. 01.10.2024) |
Reverse Charge (RCM) (Registered Tenant pays GST) |
| Unregistered | Commercial Property | Unregistered Person | Taxable @ 18% (Exempt if landlord turnover ≤ ₹20L/₹40L) |
Forward Charge (Landlord registers after crossing limit) |
| Registered | Residential Dwelling | Unregistered Person | Exempt (Rented for use as residence) |
N/A (Exempt) |
| Unregistered / Registered | Residential Dwelling | Registered Person | Taxable @ 18% (w.e.f. 18.07.2022) |
Reverse Charge (RCM) (Registered Tenant pays GST) |
2. Key Amendments Every CA & Taxpayer Must Know
1. Commercial Renting RCM Amendment (w.e.f. October 1, 2024):
Under Notification No. 09/2024-Central Tax (Rate), renting of commercial property by an unregistered landlord to a registered tenant was brought under the Reverse Charge Mechanism (RCM). The registered tenant must discharge 18% GST on RCM basis and can claim Input Tax Credit (ITC) if eligible.
2. Residential Dwelling RCM Amendment (w.e.f. July 18, 2022):
Under Notification No. 05/2022-Central Tax (Rate), renting of a residential dwelling to a registered person attracts GST @ 18% under RCM, irrespective of whether the landlord is registered or unregistered. Exception: If a proprietor rents a residential house in their personal capacity for their own residence, it is exempt (w.e.f. 01.01.2023).
3. Place of Supply (POS) Rules for Renting
Under Section 12(3)(a) of the IGST Act, 2017 (for domestic supplies) and Section 13(4) (where landlord or tenant is outside India), the Place of Supply is always the location where the immovable property is situated.
- Intra-State Supply: If the Landlord's GST registration location and Property location are in the same state = CGST (9%) + SGST (9%).
- Inter-State Supply: If the Landlord's location and Property location are in different states = IGST (18%).
4. Statutory Exemptions for Religious & Charitable Trusts
Under Notification No. 12/2017-Central Tax (Rate) (Entry 13), renting of precincts of a religious place meant for general public, owned or managed by a registered charitable or religious trust (under Section 12AA/12AB), is EXEMPT subject to monetary caps:
- Rooms: Renting of rooms where charges are less than ₹1,000 per day.
- Halls & Premises: Renting of premises, community halls, or Kalyanmandapam where charges are less than ₹10,000 per day.
- Shops & Commercial Spaces: Renting of shops or commercial spaces where charges are less than ₹10,000 per month.