GST on rent of the residential and commercial property

lipped from: https://taxguru.in/goods-and-service-tax/gst-rent-residential-commercial-property.html

From the Goods and Services Tax (GST) perspective, renting of residential and commercial property is treated as a ‘supply of service’. The present article briefly discusses GST applicability on rent in the case of both residential property and commercial property.

GST on renting of residential property

Renting income in the case of residential property has undergone a drastic change with effect from 18th July 2022. Hence, in order to go through the entire scenario of GST applicability on renting of residential property, we need to bifurcate the same in the following two periods –

1. From 1st July 2017 till 17th July 2022; and

2. From 18th July 2022 onwards.

GST applicability on renting of residential property from 1st July 2017 till 17th July 2022

GST @18% is applicable on the renting income. However, it is important to go through exemption notification no. 12/2017- Central Tax (Rate) dated 28th June 2017.

Notably, sr. no. 12 of the said exemption notification covers entries relating to renting of residential property which is reproduced hereunder for ready reference –

HeadingDescriptionEffective Rate
9963 or 9972Services by way of renting of residential dwelling for use as a residenceNIL

Accordingly, GST exemption will be available in the case following conditions are satisfied –

Condition 1 – The registered person is engaged in providing service relating to renting of residential dwelling; and

Condition 2 – The rented residential dwelling is used by the tenant for the purpose of residence.

Thus, summarizing the position of GST applicability on renting of residential property for the period from 1st July 2017 till 17th July 2022, the scenario will be –

ParticularsGST applicability
When the residential dwelling is rented for the purpose of residenceNIL
Any other situation18%

GST applicability on renting of residential property from 18th July 2022 onwards 

Based on the 47th GST council recommendation, the above position of GST applicability on renting of residential property is amended vide the following two notifications –

1. Notification no. 04/2022- Central Tax (Rate) dated 13th July 2022 – which amended the exemption notification no. 12/2017- Central Tax (Rate) dated 28th June 2017; and

2. Notification no. 05/2022- Central Tax (Rate) dated 13th July 2022 – which introduced reverse charge under renting of residential property by amending notification no. 13/2017- Central Tax (Rate) dated 28th June 2017.

Post amendment as introduced vide Notification no. 04/2022- Central Tax (Rate) dated 13th July 2022, exemption entry speaks as under –

HeadingDescriptionEffective Rate
9963 or 9972Services by way of renting of residential dwelling for use as a residence except where the residential dwelling is rented to a registered person.NIL

Accordingly, from 18th July 2022, GST exemption will be available in case the following conditions are satisfied –

Condition 1 – The registered person is engaged in providing service relating to renting of residential dwelling; and

Condition 2 – The rented residential dwelling is used by the tenant for the purpose of residence; and

Condition 3 – The tenant is not registered under GST.

Now, as can be concluded from above that if the tenant is registered under GST, then, GST will get applicable on renting of residential dwelling from 18th July 2022.

GST on rent of the residential and commercial property

However, notably, the landlord is not required to worry about the GST applicability. As the entire GST liability is mounted on the registered tenant under the reverse charge mechanism.

Notification no. 05/2022- Central Tax (Rate) dated 13th July 2022 covers reverse charge applicability in case of GST on renting of a residential dwelling. Relevant Sr. No. 5AA of the said notification is reproduced hereunder –

Sr. No.Description of serviceService providerService receiver
5AAServices by way of renting of a residential dwelling to the registered person.Any personAny registered person

The following table provides a comparative analysis of GST applicability/ exemption on renting of residential dwelling for both the periods i.e., from 1st July till 17th July 2022 and from 18th July 2022 onwards –

Particulars1st July 2017 till 17th July 202218th July 2022 onwards
Conditions to be satisfied for availing GST exemption on renting of residential dwellingThe registered person is engaged in providing service relating to renting of residential dwelling; andThe rented residential dwelling is used by the tenant for the purpose of residence.The registered person is engaged in providing service relating to renting of residential dwelling; andThe rented residential dwelling is used by the tenant for the purpose of residence; andThe tenant is not registered under GST.
GST applicability when the residential dwelling is used for residential purpose and the tenant is registered under GSTNILGST applicable @18% and GST is payable by tenant under reverse charge.
GST applicability when the residential dwelling is used for residential purpose and the tenant is not registered under GSTNILNIL
GST applicability when the residential dwelling is used for residential purpose and the landlord is registered under GSTNILGST is applicable only if the tenant is registered under GST
GST applicability when the residential dwelling is not used for residential purposeGST applicable @ 18%GST applicable @ 18%

GST on renting of commercial property

GST applicability on renting of commercial property is quite simple. Accordingly, GST is applicable @ 18% under forward charge on renting of commercial property. The scenario of GST on renting of commercial property is tabulated hereunder –

ParticularsGST applicability on renting of commercial property
The landlord is registered under GSTGST @18% applicable and payable by the landlord under forward charge
The landlord is not registered under GSTGST not applicable

Gist of GST applicability on renting of residential and commercial property

The following table summarizes the gist of GST applicability on renting of both residential and commercial property –

ParticularsStatus of landlordStatus of tenantGST applicability
GST applicability on renting of residential dwelling for the period 1st July 2017 till 17th July 2022
Renting of residential dwelling for use as a residenceRegistered/ unregisteredRegistered/ unregisteredExempt in terms of notification no. 12/2017- Central Tax (Rate) dated 28th June 2017.
GST applicability on renting of residential dwelling for the period from 18th July 2022
Renting of residential dwelling for use as a residenceRegisteredRegisteredTaxable in terms of notification no. 04/2022- Central Tax (Rate) dated 13th July 2022.However, GST is payable by the tenant under the reverse charge mechanism in terms of notification no. 05/2022- Central Tax (Rate) dated 13th July 2022.
Renting of residential dwelling for use as a residenceUnregisteredRegisteredTaxable in terms of notification no. 04/2022- Central Tax (Rate) dated 13th July 2022.However, GST is payable by the tenant under the reverse charge mechanism in terms of notification no. 05/2022- Central Tax (Rate) dated 13th July 2022.
Renting of residential dwelling for use as a residenceRegisteredUnregisteredExempt in terms of notification no. 12/2017- Central Tax (Rate) dated 28th June 2017.
Renting of residential dwelling for use other than residenceRegisteredRegistered/ UnregisteredTaxable as exemption notification doesn’t apply.
GST applicability on renting of commercial property for the period from 1st July 2017 till date
Renting of commercial propertyRegisteredRegistered/ UnregisteredTaxable @18%
Renting of commercial propertyUnregisteredRegistered/ UnregisteredExempt

Frequently Asked Questions (FAQs) related to GST on rent of residential and commercial property

Some of the important Frequently Asked Questions relating to GST applicability on rent on residential and commercial property are answered hereunder –

Q.1 Who is liable to pay GST on rent on commercial property?

Ans. GST @ 18% on rent on commercial property is payable by the registered service provider (i.e. landlord). There is no reverse charge mechanism applicable in case of GST on rent on commercial property.

Q.2 Is RCM applicable on rent for commercial property?

Ans. No, there is no reverse charge applicability on rent for commercial property.

Q.3 Is residential rent GST free?

Ans. Residential rent was totally GST free from 1st July 2017 till 17th July 2022. However, from 18th July 2022, the residential rent is not GST free if the tenant is registered under GST.

Q.4 Is GST applicable on residential dwelling?

Ans. GST was exempt on residential dwelling till 17th July 2022. However, GST @18% is applicable on residential dwelling, from 18th July 2022, if the tenant of the residential dwelling is registered under GST.

Q.5What is the meaning of residential dwelling?

Ans. Residential dwelling is not defined under the Central Goods and Services Tax Act, 2017. The general and simple meaning of residential dwelling is ‘living in a certain place, permanently or for a considerable length of time’.

Q.7 Is GST charged on residential rent?

Ans. With effect from 18th July 2022, GST is payable on residential rent if the tenant is registered under GST. In such case, GST is payable @18% by the tenant under the reverse charge mechanism.

Q.8 How does GST apply to residential rent?

Ans. From 1st July 2017 till 17th July 2022, GST is exempt in case of residential rent if the specified conditions are satisfied. However, from 18th July 2022, GST applicability/ exemption to residential rent has underwent a major change.

Q.9 Is commercial rent GST exempt?

Ans. No, there is no exemption available to commercial rent under GST.

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