GST on rental income is one of the most commonly misunderstood areas of GST law in India. Whether you need to charge GST on rent depends on whether the property is residential or commercial, whether the landlord is GST-registered, and whether the tenant is a GST-registered business.
GST on Commercial Property Rental
GST Rate: 18% on rent from commercial property
Who collects GST:
Registration threshold:
- ▸If the landlord is GST-registered → Landlord charges 18% GST on rent invoice
- ▸Tenant can claim this GST as ITC (if registered and using property for business)
- ▸Landlord earning rent from commercial property crosses ₹20 lakh/year → Mandatory GST registration
- ▸Landlord must register, issue tax invoices, and file monthly/quarterly GST returns
GST on Residential Property Rental — New Rule from 2022
Before July 18, 2022: Residential properties rented for residential purposes were fully exempt from GST.
After July 18, 2022 (Important!):
| Landlord | Tenant | GST Applicable? |
|---------|--------|------------------|
| Any (registered/unregistered) | Unregistered individual | No GST |
| Registered or unregistered | GST-registered business (tenant) | 18% GST under Reverse Charge Mechanism (RCM) |
| Registered landlord | Any | Landlord charges GST on invoice |
Key change: If a GST-registered company/LLP/proprietor rents a flat for their director/employee's residential use, the company must pay GST at 18% under Reverse Charge Mechanism (RCM) — even though it's a residential property.
Reverse Charge Mechanism (RCM) on Rent
Under RCM for residential rent:
Example: TechCorp rents a flat in Pune for ₹50,000/month for their CEO's residence. TechCorp must pay ₹9,000 IGST under RCM every month. They cannot claim ITC since the flat is for residential (personal) use.
- ▸The tenant (recipient) pays GST to the government — not the landlord
- ▸Landlord issues invoice without GST (since unregistered landlord cannot charge GST)
- ▸Tenant pays 18% on rent under RCM via GSTR-3B (GST-3B Table 3.1(d))
- ▸Tenant CAN claim this as ITC only if the property is used for business purposes (NOT for residential purpose of employees)
Rental Income by Individual — Turnover Threshold
For individual landlords:
- ▸Only commercial rental income aggregated with other taxable supplies is counted for the ₹20L threshold
- ▸Residential rental income to unregistered individuals: Exempt — not counted toward GST threshold
- ▸If you rent multiple commercial properties earning ₹20L+ → GST registration mandatory
ITC on Property-Related Expenses
GST-registered landlords can claim ITC on:
Cannot claim ITC on: Construction of residential property for rental purposes (Section 17(5)(d) blocks ITC).
- ▸Construction services (if new commercial property built)
- ▸Maintenance and repair services
- ▸Security, housekeeping services
Conclusion
GST on rental income requires careful analysis based on property type, landlord registration status, and tenant identity. The 2022 RCM notification caught many businesses off guard. Biswa Corporate Solutions provides GST advisory, registration, and filing services for property owners and businesses managing rental compliance.
