GST on rent: commercial, residential, and who pays

A landlord must register once aggregate turnover, including rent from all properties and any other business under the same PAN, crosses ₹20 lakh in a year (₹10 lakh in special category states). Rent from residential property let for residence counts towards the threshold even though it is exempt.

Rent for shops, offices, warehouses, godowns and land let for business is a taxable service at 18 percent. A registered landlord raises a tax invoice and the tenant, if registered, takes input tax credit against output tax.

Since 10 October 2024, where the landlord is not registered and the tenant is, the tenant pays the 18 percent under the reverse charge mechanism. This caught small landlords’ tenants by surprise: a registered business renting a shop from an individual with rent below the ₹20 lakh threshold now owes GST every month, in cash, because reverse charge liability cannot be paid from the credit ledger. The tenant issues a self-invoice within 30 days of the rent payment, reports the supply in GSTR-3B, pays the tax, and takes the credit in the same return if the premises are used for taxable business. Net cost nil, but only if it is done; if it is not, the demand comes with interest at 18 percent.

Rent for a residential dwelling used as a residence is exempt. The exemption was narrowed from 18 July 2022: where the tenant is a GST-registered person, the rent is taxable at 18 percent and the tenant pays under reverse charge, whoever the landlord is. The common cases are a company renting flats for employees or a guest house.

From 1 January 2023 an exception protects registered proprietors: where an individual who happens to be GST-registered rents a home in a personal capacity for their own residence, and not on account of the business, the exemption continues.

Credit on residential rent paid under reverse charge is the contested part. Where the dwelling houses employees as a term of employment, the credit is generally taken; where it is for the personal benefit of a director or proprietor, it is blocked as personal consumption. Record the purpose in the lease and the board resolution.

GST is charged on the rent plus any charges the lease makes the tenant bear as part of the letting: maintenance collected by the landlord, property tax reimbursed, and furniture or fit-out hire. A refundable security deposit is not consideration; a deposit adjusted against rent is, at the time of adjustment. Electricity recovered at actuals through a separate meter, as a pure agent, stays outside the value.

Income-tax TDS is separate and computed on the rent excluding GST; see our TDS on rent guide.

1. List every property you rent and check each landlord’s GSTIN on the portal. A landlord who stopped charging GST may have cancelled registration.
2. For unregistered landlords of commercial premises, and for residential premises used for business, start monthly self-invoices and pay reverse charge in GSTR-3B.
3. For periods since October 2024 that were missed, pay with interest through DRC-03 before a notice arrives; the credit is still available within the usual time limit.
4. Put the GST position in the lease: who bears it, and the landlord’s duty to tell you if their registration status changes.

Our return filing service tracks reverse charge items as part of the monthly cycle, and notice replies cover the demands already issued.