Under the Goods and Services Tax (GST) regime, renting of immovable property is considered a supply of service. The taxability depends on the nature of use (residential or commercial), the type of person involved (registered or unregistered), and the purpose of renting.
Who is Liable to Pay GST on Rent?
- Normally: The landlord (supplier of the service) is liable to collect and pay GST.
- In certain cases:Reverse Charge Mechanism (RCM) applies (tenant is liable).
Legal Framework
Relevant Sections and Notifications:
- Section 7 of CGST Act, 2017 – Defines the scope of “Supply”
- Schedule II, Entry 2(b) – Renting of immovable property is treated as a supply of service
- Notification No. 12/2017 – Central Tax (Rate) – Grants exemption to renting of residential dwelling for use as residence
- Notification No. 05/2022 – Central Tax (Rate) – Introduced RCM on residential rent (from 18th July 2022)
What is “Rent” under GST?
In GST law, the term “renting” refers to the act of allowing, permitting, or granting access to immovable property for consideration (payment). This is treated as “supply of service” under:
🔹Section 7(1)(a) of CGST Act:
“All forms of supply of goods or services or both… for a consideration in the course or furtherance of business…”
🔹Schedule II Entry 2(b) of CGST Act:
“Any lease, tenancy, easement, license to occupy land is a supply of services.”
Understanding “Residential Dwelling”
As per CBIC and common understanding:
A “residential dwelling” means a house or flat used or intended to be used for residential purposes.
The intent and purpose of use are crucial. If a business rents a flat for running a guest house or housing employees, it is considered business use and falls under RCM.
Types of Renting under GST
- Residential Property
| Use | Tenant’s GST Status | GST Applicability |
| Residential | Any (Individual/Business) | ✅Exempt |
| Commercial | Registered | ✅Taxable under RCM |
| Commercial | Unregistered | ❌ Not taxable (RCM not triggered) |
- Commercial Property
Always taxable at 18% GST (under forward charge, landlord charges GST).
GST under Reverse Charge Mechanism (RCM)
RCM is applicable under the following condition:
Residential dwelling rented to a registered person (for business/commercial use) triggers RCM.
✅ Applicable W.E.F. 18 July 2022:
As per Notification No. 05/2022 – Central Tax (Rate):
“Supply of service by way of renting of a residential dwelling to a registered person is taxable under reverse charge.”
This means the tenant (registered person) must:
- Self-pay GST @ 18%
- Show it under RCM in GSTR-3B
- Claim ITC if used for business purposes
Documentation Checklist
| Required Document | Purpose |
| Rent Agreement | Should clearly mention usage (residence vs business) |
| GST Registration Certificate | For tenant (to verify RCM applicability) |
| Self-Invoice under RCM | Issued by tenant (as GST is self-paid) |
| Proof of RCM Payment | For audit & ITC claims |
| ITC Ledger Entry | To support input credit claim under Section 16 |
Summary Table
| Sl. No. | Type of Property | Landlord Status | Tenant Status | Use of Property | GST Rate | Liability Type | GST Paid By |
| 1 | Residential | Any | Any (Registered or Unregistered) | Personal/Residential | Nil | Exempt | ❌ No GST |
| 2 | Residential | Unregistered | Registered | Business (Guest house, office) | 18% | RCM | ✅ Tenant |
| 3 | Residential | Registered | Registered | Business use | 18% | RCM | ✅ Tenant |
| 4 | Residential | Registered | Unregistered | Business use | ❌ | Not taxable | ❌ Not applicable |
| 5 | Commercial | Registered | Registered | Business (Office, Shop) | 18% | Forward Charge | ✅ Landlord |
| 6 | Commercial | Unregistered | Registered | Business use | 18% | Forward Charge (if landlord is liable) | ✅ Landlord |
| 7 | Commercial | Registered | Unregistered | Business use | 18% | Forward Charge | ✅ Landlord |