GST on Lease & Rent of Property

Updated: 3 June 2026 | CGST Act 2017 — Sections 7, 9; Notification 05/2022-CT(Rate)

GST on commercial property lease is 18% (SAC 9973). Residential property rented to individuals for personal use is exempt. If a GST-registered business rents residential property, it pays 18% GST under Reverse Charge Mechanism (RCM). Finance leases are taxed as supply of goods; operating leases as services at 18%.

18% GST

Standard rate on all commercial and industrial property leases.
Residential-to-individual leases are exempt; residential-to-registered-business attracts 18% under RCM (w.e.f. 18 July 2022).

GST Rates on Lease & Rent — Quick Reference

Type of Lease / Rental	GST Rate	Charge Mechanism	ITC Available to Tenant?
Commercial property (office, shop, warehouse)	18%	Forward Charge (landlord charges)	Yes (if used for taxable supply)
Residential property — to individual for personal use	Exempt	—	N/A
Residential property — to registered business	18%	RCM (tenant pays)	Yes (subject to conditions)
Industrial / factory lease	18%	Forward Charge	Yes
Land lease to SEZ developer/unit	0% (zero-rated)	Zero-rated	Refund of ITC available
Long-term lease premium (30/60/99 years)	18%	Forward Charge on premium	Yes
Transfer of Development Rights (TDR)	18%	Forward Charge	Yes
Finance lease (ownership transfer at end)	Rate of goods leased	Upfront on full value	Yes
Operating lease (machinery, vehicles, equipment)	18%	Forward Charge (periodic)	Yes

SAC Codes for Lease & Rental Services

SAC Code	Description	GST Rate
997311	Operating lease/rental of land & buildings (residential)	18% / Exempt*
997312	Rental of non-residential buildings	18%
997313	Rental of residential buildings	18% / Exempt*
997321	Rental/leasing of cars & light motor vehicles	18%
997331	Leasing of agricultural machinery & equipment	18%
997391	Leasing of intellectual property (non-software)	18%

*Exempt when rented to individual for personal residential use; 18% under RCM when rented to registered business.

Key Rules & Conditions

Registration threshold: A landlord must register for GST if aggregate turnover from taxable supplies (including commercial rent) exceeds ₹20 lakh per year (₹10 lakh in special category states like J&K, Uttarakhand, etc.).

ITC on commercial rent: Registered tenants can claim full ITC on GST paid on commercial rent, provided the premises are used for taxable business activities. Partial use requires proportionate ITC under Rule 42/43.

RCM on residential rent (post July 2022): If a GST-registered entity (company, LLP, firm) rents a residential property, it must self-invoice and deposit 18% GST under RCM, regardless of whether the landlord is GST-registered.

Finance vs Operating Lease: In a finance lease, GST is charged once upfront on the full asset value at the rate applicable to the asset (not 18% flat). In an operating lease, 18% GST applies on each periodic rental instalment.

Frequently Asked Questions

Is GST applicable on renting residential property?

GST on residential property depends entirely on who the tenant is. If an individual takes a residential property on lease or rent for personal residential use, the transaction is fully exempt from GST — no GST is charged, and the landlord has no GST obligation on that rental income. However, if a GST-registered business entity takes a residential property on rent (for example, to house its employees), GST at 18% becomes applicable under the Reverse Charge Mechanism (RCM). Under RCM, the registered recipient (the company or firm, not the landlord) must pay GST directly to the government. The landlord does not charge GST, but the tenant-company must self-invoice and deposit 18% GST on the rent amount. This rule was introduced via Notification No. 05/2022-CT(Rate) effective 18 July 2022. Before this date, residential property rented to any entity was exempt. Small landlords whose total turnover is below ₹20 lakh (₹10 lakh in special category states) are not required to register for GST, but the RCM liability still applies to the registered tenant regardless of whether the landlord is registered.

What is the GST rate on leasing commercial property?

Leasing or renting commercial property — shops, offices, warehouses, factories, malls — attracts GST at 18% under SAC code 9972 (real estate services). This applies whether the arrangement is a short-term rent or a long-term lease. The landlord must register for GST if their aggregate turnover from all taxable supplies (including commercial rent) exceeds ₹20 lakh per year (₹10 lakh in special category states). Once registered, the landlord collects 18% GST on the rent amount and deposits it with the government. The tenant who is also a registered taxpayer can claim Input Tax Credit (ITC) on this GST paid, provided the rented premises are used for taxable business activities. ITC cannot be claimed if the property is used for personal purposes or for making exempt supplies. A very important carve-out: a Special Economic Zone (SEZ) developer or unit leasing land within an SEZ is eligible for zero-rated supply — effectively 0% GST — because SEZ transactions are treated as deemed exports. Long-term leases (e.g., 30 or 99 years) against a one-time upfront premium are taxed at 18% on the premium amount at the time of registration of the lease deed.

What is SAC code for lease and rental services under GST?

Services of leasing and rental are classified under Group 9973 in the GST services tariff. Within this group, the relevant SAC codes are: SAC 997311 — operating lease or rental services concerning land (excluding vacant land) and buildings; SAC 997312 — rental or operating lease services concerning non-residential buildings; SAC 997313 — rental or operating leasing services concerning residential buildings. For finance leases — where the lessor effectively finances the acquisition and ownership is intended to transfer to the lessee at the end of the lease term — GST is treated as a supply of goods (not services), because a finance lease is economically equivalent to a hire-purchase agreement. In such cases, GST is charged upfront on the full value of the asset at the rate applicable to that asset (e.g., 18% for most machinery and equipment). The monthly instalments in a finance lease are not separately taxed. For operating leases, where ownership stays with the lessor, 18% GST applies on each periodic rental payment under SAC 9973. The distinction between finance lease and operating lease thus has a significant impact on GST treatment, timing, and ITC availability.

Can a tenant claim ITC on GST paid on office rent?

Yes, a GST-registered tenant can claim Input Tax Credit (ITC) on GST paid for renting commercial or industrial property, subject to certain conditions. First, the tenant must be a registered taxpayer under GST. Second, the rented premises must be used for the purpose of furtherance of business and for making taxable (or zero-rated) supplies. If the premises are used partly for taxable and partly for exempt supplies, ITC must be apportioned under Rule 42/43 of the CGST Rules — only the proportionate ITC attributable to taxable supplies is claimable. Third, the GST invoice from the landlord (or the self-invoice under RCM) must be a valid tax invoice with all required particulars. Fourth, ITC cannot be claimed on GST paid for a property used as a guest house, vacation home, or for personal residential purposes (blocked credit under Section 17(5) of CGST Act). The ITC on commercial rent is typically CGST + SGST or IGST (for inter-state landlord-tenant), and can be used to offset output GST liability on the tenant's sales/services. This makes the effective cost of office or warehouse rent lower for GST-registered businesses.

Is GST applicable on a 99-year lease or development rights?

Long-term leases — commonly 30 years, 60 years, or 99 years — are treated as a supply of service under GST and attract 18% GST. The GST is typically charged on the one-time upfront lease premium or salami paid at the time of entering into the lease agreement and registration of the deed. The periodic lease rent (annual or monthly) paid during the lease tenure is also subject to 18% GST separately. Government bodies such as NOIDA, DDA, MIDC, etc. that grant long-term leasehold rights to businesses are also covered — the lessee (business entity) must pay GST either to the government body (if registered) or under RCM if the government body is not registered. Transfer of Development Rights (TDR) — where a landowner transfers development rights to a builder in exchange for constructed apartments or cash — is taxable at 18% GST. However, where a landowner transfers TDR for construction of affordable housing projects, the rate is 1% with no ITC. Land lease to SEZ developers is zero-rated. Any lease of land or building to educational institutions for educational purposes may be exempt under specific notifications, subject to conditions.

GST on Real Estate GST Reverse Charge (RCM) Input Tax Credit (ITC) Guide GST Registration Rules GST on Construction Services GST Exemption List

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