Commercial rent is taxed at 18% if the landlord is GST-registered. Residential property let to a GST-registered business (company, LLP, proprietor) attracts 18% under Reverse Charge (RCM) — the tenant pays, effective 18 July 2022. Residential let to an individual for personal use is fully exempt. A landlord must register once turnover crosses ₹20 lakh.
GST on Rent — Decision Table
Every common rent scenario, with who pays the GST and whether Input Tax Credit is available.
| Scenario | GST? | Rate | Who Pays | ITC |
|---|---|---|---|---|
| Commercial → registered business | Yes | 18% | Landlord (forward charge) | Yes |
| Residential → company / LLP / firm | Yes (RCM) | 18% | Tenant (reverse charge) | No · 17(5)(g) |
| Residential → individual (personal use) | No | Nil | — | — |
| Commercial → landlord turnover < ₹20L | No | Nil | — | — |
| Warehouse / godown (business use) | Yes | 18% | Landlord | Yes |
SAC 997211 (commercial) / 997212 (residential). Rent rules were not changed by the GST 2.0 rationalisation.
Residential Rent & the RCM Trap
Before 18 July 2022, residential property let to a registered business was exempt. Since then, when a GST-registered business takes a residential dwelling on rent — for an office, guest house or employee accommodation — the tenant must self-pay 18% GST under RCM, even if the landlord is unregistered.
The RCM GST on a residential flat used for employee accommodation is blocked as ITC under Section 17(5)(g) — you pay it but cannot recover it. This is a compliance risk often missed by startups and small firms taking flats for staff or a registered office.
Renting a flat or office for your business? Get your RCM & ITC position checked.
Talk to a GST Expert →GST Registration Threshold for Landlords
A landlord must register and charge GST on commercial rent once aggregate turnover (rent + any other business income) exceeds:
- ₹20 lakh/year — most states
- ₹10 lakh/year — special-category states (Manipur, Mizoram, Nagaland, Tripura, etc.)
A landlord with only residential rental income to unregistered individuals stays outside GST entirely, regardless of the rent amount.
ITC on Rent — When Can You Claim It?
| Scenario | ITC? | Reason |
|---|---|---|
| GST on commercial office / shop rent | Yes | Business use — normal B2B ITC rules |
| RCM GST on residential flat for employees | No | Blocked under Section 17(5)(g) — personal / employee benefit |
| GST on warehouse / godown rent | Yes | Business use (storage) — ITC eligible |
| RCM GST on residential flat as registered office | No* | Generally blocked; AAR rulings are mixed |
* Consult a GST practitioner for registered-office use — advance rulings differ.
- Rates & notifications: gst.gov.in
- CBIC: cbic-gst.gov.in
- Residential-rent RCM: Notification 05/2022-CT(R) (eff. 18 Jul 2022)
- ITC block: Section 17(5)(g), CGST Act 2017
Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position or speak to our CA team before you act on it.