Overview of GST on Property Rentals
Renting of immovable property is classified as a supply of service under Schedule II of the CGST Act. The taxability and rates differ fundamentally based on whether the property is commercial or residential, and whether the tenant is GST-registered.
1. Commercial Property Renting
- Rate: Standard 18% GST (9% CGST + 9% SGST or 18% IGST).
- Threshold: Landlord must register and charge GST if their aggregate annual turnover across all business activities exceeds ₹20 Lakhs.
- ITC: The commercial tenant can claim 100% Input Tax Credit on the GST paid against their outward business tax liability.
2. Residential Property Rented to Registered Business (RCM)
With effect from 18th July 2022, if a residential dwelling is rented to a GST-registered entity or proprietor, GST is applicable at 18% under Reverse Charge Mechanism (RCM).
- The tenant must pay 18% GST directly to the government under RCM in their monthly GSTR-3B.
- Exception: If a registered proprietor rents a residential house strictly in their personal capacity for their own private residence and not for business use, RCM is exempted.
3. Residential Rent to Unregistered Individuals
Renting a residential dwelling to an unregistered individual for personal residential use remains 100% exempt from GST.