GST on Lease in India — 18%, RCM or Exempt?

It depends on the tenant. A residential dwelling leased to an individual for personal residential use is fully exempt from GST, whatever the rent. But when a GST-registered business leases a residential property — for an office, guest house or employee accommodation — 18% GST applies under Reverse Charge (RCM) and the tenant self-pays it. This RCM rule has applied since 18 July 2022.

Leasing and rental of immovable property fall under SAC group 9972 — commonly 997212 for non-residential (commercial) buildings and 997213 for leasing of land and buildings. Leasing or rental of movable goods such as machinery and vehicles falls under group 9973 (for example 997314 for other transport equipment and 997311 for other machinery). Most of these are taxed at 18%.

No. The GST 2.0 reform effective 22 September 2025 restructured most goods and services into a two-slab 5%/18% system with a 40% demerit rate, but it did not change the leasing-of-property rules. Commercial and equipment leases stay at 18%, the residential-lease RCM continues, and residential lease to individuals remains exempt.

Yes — under Reverse Charge (RCM) since 18 July 2022. When a GST-registered business (company, LLP, firm or registered proprietor) leases a residential property for any purpose, including employee accommodation, the tenant pays 18% GST under RCM directly to the government. The landlord does not charge it and may issue a bill without GST. ITC on this RCM GST is blocked under Section 17(5) where the use is for staff or personal benefit.

The lessee (tenant). Under the residential-lease RCM rule, the GST-registered business tenant self-assesses and pays 18% GST directly to the government in its GSTR-3B and, where required, raises a self-invoice. The landlord issues a rent bill without GST. This applies regardless of whether the landlord is registered.

No. Leasing residential property to an individual who is not GST-registered, for personal residential use, is completely exempt — no GST regardless of the monthly rent. The 18% RCM provision applies only when the lessee is a GST-registered business.

An operating lease keeps ownership with the lessor and is a supply of service — 18% GST applies on each periodic rental under SAC 9973. A finance lease, where ownership is intended to pass to the lessee at the end, is treated as a supply of goods: GST is charged upfront on the full value of the asset at the rate applicable to that asset, and the instalments are not separately taxed again. The distinction changes both the timing and the taxable value.

An operating lease of machinery, plant or equipment is taxed at 18% on each rental payment. If it is a finance lease with ownership transfer, GST is charged upfront on the full asset value at the rate that applies to that asset (18% for most machinery). A registered lessee using the asset for taxable business can generally claim ITC.

Yes. Leasing or renting of motor vehicles is taxed at 18% as a service. However, ITC on the lease of motor vehicles for the transport of persons is often blocked under Section 17(5) unless the business is in vehicle leasing, transport, driving instruction or resale — so confirm eligibility before claiming credit.

Not always. A long-term lease (30 years or more) of an industrial plot by a government or public-sector body against a one-time premium can be exempt under Entry 41 of Notification 12/2017-CT(R). And the Supreme Court in July 2026 affirmed that assigning existing industrial leasehold rights to a third party is not taxable, as it is a transfer of immovable property under Schedule III. A commercial land lease by a private lessor, however, is taxable at 18%.

No output tax is charged. Land or a unit leased inside a Special Economic Zone is a zero-rated supply because SEZ transactions are treated as deemed exports. The lessor can supply under a Letter of Undertaking without paying GST, or pay and claim a refund, and the SEZ lessee is not out of pocket on the tax.

It depends on the tenure and nature. A long-term (30-year-plus) lease of an industrial plot by a public body such as NOIDA, GIDC or MIDC against an upfront premium can qualify for the Entry 41 exemption. Shorter leases and periodic rentals are generally taxable at 18%. Where the government body is unregistered, the business lessee may have to discharge GST under RCM — the position varies, so verify before you pay.

Yes. A GST-registered tenant can claim full Input Tax Credit on GST paid on a commercial office, shop or warehouse lease, provided the premises are used for taxable (or zero-rated) business supplies, a valid tax invoice was issued, and the credit appears in GSTR-2B. If the premises serve partly exempt supplies, ITC is apportioned under Rule 42/43. Credit is blocked for residential property used as a guest house or for personal use.

A lessor must register and charge GST once aggregate turnover — rent plus any other business income — exceeds ₹20 lakh a year (₹10 lakh in special-category states). A lessor with only residential rental income to unregistered individuals need not register, whatever the amount, since that income is exempt. Voluntary registration below the threshold is allowed.

For a taxable long-term lease, yes — the one-time premium (salami) and the recurring lease rent are each a taxable value, both at 18% where the lease is taxable. But if the long-term industrial-land lease qualifies for the Entry 41 exemption, the upfront premium can be exempt while any separate services remain taxable. Read the specific lease and notification before invoicing.