GST on Rent: Residential, Commercial and RCM

GST on rent used to have a simple answer: residential rent was exempt, commercial rent was taxed if the landlord was registered. Two changes broke that. From 18 July 2022, a registered tenant renting a residential dwelling pays GST on it under reverse charge. From 10 October 2024, a registered tenant renting commercial space from an unregistered landlord does the same. The result is that the answer now depends on three facts — what kind of property it is, whether the landlord is registered, and whether the tenant is registered — and this post walks through every combination.

The three questions that decide GST on rent

Renting out immovable property is a supply of services. It is classified under SAC heading 9972 — the codes are listed in our SAC code for rent and leasing reference — and the place of supply is the location of the property, not the address of either party.

Beyond that, you need three answers before you can say who owes what:

1. Is it a residential dwelling, and is it used as a residence? The exemption is written around both the character of the property and its use.
2. Is the landlord registered under GST? This decides whether forward charge is even possible.
3. Is the tenant registered under GST? This decides whether reverse charge can apply. It never applies to an unregistered tenant.

Short-stay accommodation — hotel rooms, guest houses, serviced apartments sold by the night — is a different supply with its own rate structure and is out of scope here. See SAC code for hotel and accommodation services. Buying property is also a different question; GST on under-construction property covers that.

Residential property: exempt, until the tenant is registered

Services by way of renting a residential dwelling for use as a residence have been exempt since GST began. That is why a family renting a flat has never seen GST on the rent, and it is still true today for any tenant who is not registered.

The change came on 18 July 2022. The exemption was narrowed so that it no longer covers a residential dwelling let to a registered person, and a matching entry was added to the reverse-charge list: renting of a residential dwelling to a registered person is taxed in the tenant’s hands. The landlord’s registration status does not matter for this entry — a registered landlord and an unregistered landlord are treated the same way. The tenant self-assesses and pays the tax at the standard rate.

The obvious casualty was the sole proprietor. A proprietorship is not a separate legal person, so a shopkeeper with a GSTIN renting a flat to live in looked like a “registered person” renting a residential dwelling. A later amendment, effective 1 January 2023, carved that out: where a registered proprietor rents a residential dwelling in a personal capacity for use as their own residence, and on their own account rather than the business’s, the exemption continues to apply.

The cases that do fall under reverse charge are mostly the ones you would expect: a company or LLP taking flats for employees or directors, a registered partnership renting a guest house, a registered business using a residential flat as an office. The last one is worth flagging, because using a residential dwelling for business means the “for use as a residence” exemption was never available to begin with.

Commercial property: forward charge, or reverse charge since October 2024

Renting shops, offices, warehouses, factory sheds or land for business use is a taxable supply at 18%. The September 2025 rate rationalisation, which folded most goods and services into the 5% and 18% slabs, left renting of commercial property on the standard rate. As always, confirm the current rate for a specific supply on CBIC’s GST rate finder before you write it into a lease.

Registered landlord. The landlord charges GST on the invoice under forward charge, reports it in GSTR-1 and pays it in GSTR-3B. The tenant’s registration status does not change this. You can check the arithmetic on a given rent with the GST calculator.

Unregistered landlord, registered tenant. Until October 2024 this was a gap: a small landlord below the threshold did not charge GST, and nobody paid it. From 10 October 2024, renting of any property other than a residential dwelling by an unregistered person to a registered person was added to the reverse-charge list. The registered tenant now pays the 18% itself.

Composition taxpayers. They were caught by the October 2024 entry at first, which hurt, because a composition dealer cannot take the credit that makes reverse charge cost-neutral for everyone else. The GST Council later recommended excluding them, and the entry was amended to do that from the date it was notified. The exclusion does not reach back to October 2024. If you are on the composition scheme and pay rent to an unregistered landlord, confirm the current entry and its effective date on cbic-gst.gov.in before deciding what you owe for any given month.

Unregistered landlord, unregistered tenant. No GST. Neither party is in the system.

Who pays: the full matrix

Put the three questions together and every rental falls into one of these rows.

The single fact that moves most rows is the landlord’s registration. A lease that says “GST extra as applicable” means nothing until you know whether the landlord actually holds an active GSTIN. Check it when the lease is signed, and again periodically — registrations get cancelled and suspended while the landlord keeps sending the same invoice template. The GST number search does five lookups a day free with no signup; for a rent ledger across many locations, the GST API returns registration status and filing history in one call at ₹0.50 per verification.

When a landlord has to register

Renting is a supply of services, so a landlord uses the services threshold: ₹20 lakh of aggregate turnover in a financial year in most states, and ₹10 lakh in the special-category states of Manipur, Mizoram, Nagaland and Tripura. The full table, including the goods thresholds, is in our guide to the GST registration turnover limit.

Three points trip up individual landlords:

• Aggregate turnover is PAN-wide and includes exempt supplies. If you let commercial property and residential property, the exempt residential rent counts towards the ₹20 lakh along with the commercial rent. So does rent from properties in different states under the same PAN.
• Only exempt supplies means no registration. A person who makes nothing but exempt supplies is not liable to register, so a landlord whose only income is residential rent let as residences does not need a GSTIN, however large that rent is.
• Registration is per state. Because the supply is made from the property, a landlord who crosses the threshold and owns commercial property in two states generally needs a registration in each.

Once registered, the landlord charges GST on commercial rent under forward charge. Rent that is taxable in the tenant’s hands under reverse charge is not the landlord’s output tax; the landlord issues an invoice that says tax is payable on reverse charge and charges no GST on it.

Input tax credit for the tenant

GST on rent for premises used in the course or furtherance of business is ordinary input tax credit. The source of the tax does not matter: credit is available whether the landlord charged it on the invoice or you paid it yourself under reverse charge. The standard conditions in Section 16 apply — see the input tax credit rules for the full list.

For forward-charge rent, the credit has to appear in your GSTR-2B, which means the landlord must have reported the invoice in GSTR-1. For reverse-charge rent, the credit follows your own payment: you can claim it in the same return in which you discharge the liability.

Where credit gets restricted:

• Mixed use. Premises used partly for exempt supplies or partly for non-business purposes need the common-credit apportionment in Rules 42 and 43.
• Personal consumption. Section 17(5) blocks credit on goods and services used for personal consumption. Residential accommodation taken for employees needs a case-by-case look at whether it serves the business or is a personal benefit to the employee.
• Construction is not rent. The Section 17(5) blocks on constructing immovable property on your own account do not reach rent paid to occupy a building someone else owns. Our explainer on blocked credits under Section 17(5) covers the construction block in detail.
• Wrong state. Rent on a property in one state carries that state’s CGST and SGST. A tenant registered only in another state cannot use that credit, because it is not its tax.

How a tenant actually pays reverse charge on rent

The mechanics are the same as any other reverse-charge supply, set out in full in our guide to the reverse charge mechanism under GST. For rent they come down to five steps:

1. Self-invoice. When the landlord is unregistered, you raise a self-invoice for the rent. When the landlord is registered but the supply is under reverse charge (the residential case), the landlord’s invoice should state that tax is payable on reverse charge.
2. Pay in cash. Reverse-charge liability is paid through the electronic cash ledger. It cannot be set off against your input tax credit.
3. Report it in GSTR-3B. Reverse-charge liability goes in Table 3.1(d). It is not auto-populated from anyone else’s return; you enter it.
4. Claim the credit. The matching credit is claimed in the ITC table of the same GSTR-3B, if you are eligible.
5. Watch the time of supply. For reverse charge on services, liability arises on the earlier of the payment date and a set period after the supplier’s invoice. Paying rent late does not postpone the tax indefinitely.

The failure mode to avoid is the quiet one: a registered business that started renting from an unregistered landlord before October 2024 and never updated its accounts payable. Nothing on the invoice changed, but the tenant has owed reverse charge on every rent payment since. Interest runs on unpaid reverse charge like any other short payment.

Frequently asked questions