Immovable PropertySAC 9972

GST on Rent & Leasing — Commercial, Residential & Equipment

Complete guide to GST on renting immovable property (commercial & residential), equipment leasing, vehicle rental, and long-term land leases. Covers the 2022 residential RCM change, ITC eligibility, place of supply, and TDS provisions.

18%

Commercial Rent

18% RCM

Residential (Reg. Tenant)

Exempt

Residential (Unreg.)

18%

Lease (Land, 30+ yrs)

18%

Equipment Leasing

18%/28%

Vehicle Leasing

9972

SAC Code

₹20 Lakh

Threshold

GST Provisions for Rent & Leasing

Commercial Rent — 18% GST

Renting of immovable property for commercial use (office, shop, warehouse, factory) attracts 18% GST. Landlord must register if annual rental exceeds ₹20 lakh. Tenant can claim full ITC on rent GST. Place of supply = location of property (always CGST+SGST, never IGST for immovable property).

Residential Rent — Conditional Exemption

Residential property rented to unregistered individuals is EXEMPT from GST. However, from July 18, 2022 (47th Council), if the tenant is GST-registered (even for business residence), 18% GST applies under Reverse Charge — tenant pays GST, not landlord.

Long-Term Lease of Land

Lease of land for 30+ years (e.g., industrial plots by GIDC/SIPCOT) treated as sale of land — exempt if consideration is in the form of upfront premium. If periodic rent is charged, 18% applies. Lease of industrial plots by government to industrial units is exempt.

Equipment & Machinery Leasing

Leasing/renting of equipment, machinery, IT hardware, and plant without operator attracts 18% GST under SAC 9973. With operator, it's classified differently (works contract or manpower supply). ITC available to lessee on the GST component of lease rentals.

Vehicle Leasing & Car Rental

Leasing of motor vehicles: 18% GST for most vehicles, 28% for luxury cars (engine capacity >1500cc or SUVs). Car rental with driver: 5% without ITC or 12% with ITC. Self-drive rental (without driver) treated as leasing at 18%. Electric vehicles on lease at 5%.

TDS on Rent (Section 51)

Government entities and specified persons must deduct TDS at 2% on rent payments exceeding ₹2.5 lakh under a single contract. TDS deducted appears in tenant's Electronic Cash Ledger and can be used for GST payment. Regular businesses are NOT required to deduct GST TDS on rent.

GST Rate Matrix — Rent & Leasing

ServiceRateMechanismITC
Office/shop/commercial space rent18%Forward chargeYes
Warehouse/godown rent18%Forward chargeYes
Residential rent (unregistered tenant)ExemptN/AN/A
Residential rent (registered tenant)18%Reverse chargeYes
Industrial plot lease (govt, upfront)ExemptN/AN/A
Industrial plot lease (periodic rent)18%Forward chargeYes
Equipment/machinery leasing18%Forward chargeYes
IT hardware leasing18%Forward chargeYes
Car rental (with driver)5%/12%Forward chargeNo/Yes
Self-drive car rental18%Forward chargeYes
Electric vehicle leasing5%Forward chargeNo
Hotel room (≤₹1,000)12%Forward chargeYes

Frequently Asked Questions

Is GST applicable on residential rent?
It depends on the tenant's GST status. If the tenant is NOT registered under GST (individual/unregistered person renting for personal use), rent is EXEMPT. If the tenant is GST-registered (even if renting for personal residence), 18% GST applies under Reverse Charge Mechanism from July 18, 2022. The tenant pays and can claim ITC if used for business.
Can tenants claim ITC on office rent?
Yes, GST-registered tenants paying 18% GST on commercial rent can claim full Input Tax Credit. The landlord must issue a tax invoice with GST. The ITC is available in the month the invoice is received and payment is made to the supplier. This applies to office rent, shop rent, warehouse rent, and any commercial property.
What is the GST treatment of security deposits?
Refundable security deposits (returned at end of lease) are NOT subject to GST — they are not consideration for supply. Non-refundable deposits (adjusted against rent or forfeited) attract 18% GST as they are deemed part of rental consideration. Interest-free deposits with no adjustment are exempt.
How does RCM work for residential rent?
From July 2022, if a GST-registered person rents residential property, they must pay 18% GST under Reverse Charge (RCM). The landlord does NOT charge GST. The tenant self-assesses, pays via GSTR-3B, and claims ITC (if property used for business). If used purely for personal residence, ITC is blocked under Section 17(5). The landlord has no GST liability.

Rental GST Compliance — Automated

Laabam.One handles commercial rent invoicing, residential RCM self-assessment, equipment lease ITC tracking, and TDS deduction on rental payments.

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