GST on Rent 2026 — 18% on Commercial, 0% on Residential (+ RCM)
GST on rent in India depends on whether the property is residential or commercial, and who the tenant is. Commercial rent to businesses attracts 18% GST, while residential rent to individuals remains exempt. The 2022 amendment also introduced RCM for registered businesses renting residential property.
By Arjun Sharma· GST & Tax Compliance Specialist···Reviewed for GST accuracy
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Quick Answer
Commercial property rent (office, shop, warehouse) attracts 18% GST under SAC 997212 — mandatory when the landlord's annual rental income exceeds ₹20 lakh. Residential rent to individuals is fully exempt. However, if a GST-registered business rents a residential flat for its employees or operations, 18% GST applies under Reverse Charge Mechanism (RCM) — the business pays GST directly to the government, not the landlord.
GST on Commercial vs Residential Rent
Renting commercial property (office, shop, warehouse, factory) to a business entity attracts 18% GST (SAC 997212). The landlord must be GST-registered if annual rental income exceeds ₹20 lakh. The tenant (if GST-registered) can claim ITC on the rent paid. Residential property rented to individuals for personal use is exempt from GST — no GST is charged, and no registration is needed solely for residential rent income.
Rental Type
GST Rate
Who Pays
Commercial property (office, shop, warehouse)
18%
Landlord charges tenant
Residential property to individual
Exempt
No GST
Residential property to GST-registered business
18% (RCM)
Tenant pays directly
Co-working space / managed office
18%
Landlord charges tenant
Industrial shed / factory to business
18%
Landlord charges tenant
RCM on Residential Property — The 2022 Rule
From July 18, 2022, if a GST-registered business rents a residential property for any purpose (employee accommodation, office use, guest house), the business must pay 18% GST under Reverse Charge Mechanism (RCM). The landlord does not charge GST — the tenant business self-invoices and pays the government directly. This GST paid under RCM can be claimed as ITC only if the flat is used for business purposes, not for providing employee accommodation (blocked credit under Section 17(5)).
Example
A Pune startup rents a 3BHK flat (₹50,000/month) as a co-living space for its developers. Under RCM: GST = 18% × ₹50,000 = ₹9,000. The startup pays ₹9,000 directly to the government every month. Since it is used for employees, ITC cannot be claimed. If used as an office/working space instead, ITC is claimable.
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Landlords renting commercial property must issue a GST tax invoice each month showing: property address, rental period, rent amount, GST at 18% (CGST 9% + SGST 9% for same-state tenant, IGST 18% for different-state tenant), SAC code 997212, and both parties' GSTINs. If the tenant pays an advance, GST applies on the advance — a receipt voucher must be issued.
Example
A Delhi landlord rents office space to a Mumbai company for ₹2,00,000/month. Inter-state rental → IGST 18% = ₹36,000. Total monthly invoice: ₹2,36,000. The Mumbai company claims ITC of ₹36,000 each month against its GST liability.
ITC on Rent — What Tenants Can Claim
GST-registered tenants paying 18% GST on commercial rent can claim the full Input Tax Credit (ITC). This reduces monthly GST payable. Conditions: the rent must be for business use, the landlord must issue a proper GST invoice, and the ITC must appear in GSTR-2B. ITC on residential accommodation for employees is blocked under Section 17(5)(g) — no ITC is available.
Rent Type
ITC Claimable?
Commercial office rent
Yes — full ITC
Warehouse / storage rent
Yes — full ITC
Co-working space membership
Yes — full ITC
Residential flat for employees
No — blocked credit
Residential flat used as office
Yes — if used for business
Common GST Mistakes in Rent Invoicing
Not registering for GST when commercial rental income crosses ₹20 lakh — penalties apply
Charging CGST+SGST for an inter-state tenant instead of IGST
Skipping GST on rent advances — advance receipt requires a receipt voucher
Using wrong SAC code — commercial rent is SAC 997212, not a generic service code
Tenant not self-invoicing under RCM for residential property rented from an unregistered landlord
Claiming ITC on employee residential accommodation — this is a blocked credit
FAQs
Is GST applicable on residential rent?
Residential rent paid by individuals for personal living is exempt from GST. If a company rents a flat for an employee or as office space, 18% GST applies under RCM — the company pays GST directly to the government.
What is the GST rate on commercial rent?
18% GST on commercial property rent (SAC 997212). Mandatory for landlords with annual rental income above ₹20 lakh. CGST 9% + SGST 9% for intra-state, IGST 18% for inter-state tenants.
Can tenants claim ITC on rent paid?
Yes — for commercial rent. GST-registered tenants paying 18% GST on office, shop, or warehouse rent can claim full ITC. Employee accommodation is a blocked credit under Section 17(5).
Does GST apply on rent advance or security deposit?
GST applies on advance rent payments — a receipt voucher must be issued. Refundable security deposits with no service element are not subject to GST if returned without adjustment against rent.
Why Businesses Stop Using Excel for GST Invoices
Manual GST calculation mistakes
One wrong CGST/SGST split or a misapplied rate triggers notices and ITC denial for your buyer.
Slow invoice creation
Copying last month's Excel file, updating dates, recalculating — 20 minutes for what should take 30 seconds.
Formatting breaks on every device
Excel invoices look different on every printer and PDF converter. Clients complain about unreadable layouts.
No easy sharing or payment link
Sending PDFs over WhatsApp with no way for clients to pay directly slows down collections.
Incorrect tax type (IGST vs CGST+SGST)
Excel can't auto-detect intra vs inter-state supply. Wrong tax type = ITC rejected for your buyer.
Disclaimer: The information in this article is for general informational purposes only and does not constitute professional tax, legal, or financial advice. GST rules and rates are subject to change. Consult a qualified CA or tax professional before making compliance decisions.
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