GST Treatment on Rent in 2026: Living or Doing Business? That One Question Decides
The applicability of GST on rent hinges on a single pivotal question: is the property used for personal living or commercial business? Residential rent for personal use remains exempt, while commercial usage triggers 18% GST under Forward Charge Mechanism (FCM) or Reverse Charge Mechanism (RCM) based on registration status.[1][5]
Understanding GST Basics on Rental Income
GST on rent is a tax on the supply of services from leasing properties, applicable primarily to commercial rentals. Landlords must register for GST if annual rental income exceeds Rs. 20 lakh (Rs. 10 lakh in special category states), but residential rentals for living do not count towards this threshold.[1][3][4]
The standard GST rate across commercial rentals is 18%, covering offices, shops, warehouses, co-working spaces, and even residential properties sublet for business purposes.[1][2][4]
- GST-exempt: Pure residential use by individuals not registered under GST.
- GST-applicable: Any business or commercial exploitation of the property.[5]
Key Exemption for Residential Dwellings
Renting a house or flat strictly for the tenant’s personal residence incurs no GST, simplifying compliance for small landlords and individual tenants.[2][5][7]
GST on Residential Properties: When It Applies
While residential rent is generally exempt, exceptions arise based on tenant status and usage. If a GST-registered business rents a residential property for office or employee accommodation (e.g., guest houses, PGs, service apartments), GST kicks in at 18%.[1][2][5]
- Individual to Individual (Residential Use): Exempt – No GST if tenant uses it for living and is unregistered.[2][5]
- To GST-Registered Tenant: 18% under RCM – Tenant pays and claims ITC if eligible; landlord does not charge GST.[1][2][4]
- Commercial Conversion: Even residential property becomes taxable if used for business, like company-leased flats.[5]
Registration Thresholds and Compliance
Landlords with purely residential income below Rs. 20 lakh need not register. However, mixed portfolios or commercial rents mandate registration, with proper invoicing essential for ITC claims on maintenance or repairs.[1][3]
Example: Monthly rent Rs. 1,00,000 for a residential flat to an unregistered individual – Total payable: Rs. 1,00,000 (no GST).[1][3]
GST on Commercial Properties: Mandatory Taxation
Commercial rentals – offices, shops, warehouses – always attract 18% GST, regardless of landlord or tenant registration, under FCM or RCM.[1][4][5]
| Scenario | Landlord Status | Tenant Status | Mechanism | Who Pays? |
|---|---|---|---|---|
| FCM | Registered | Any | Forward Charge | Tenant pays landlord (landlord remits) |
| RCM | Unregistered | Registered | Reverse Charge | Tenant directly to govt |
| No GST | Unregistered | Unregistered (Residential) | None | No payment |
[5]
Landlords charge GST on rent (e.g., Rs. 1,00,000 rent + Rs. 18,000 GST = Rs. 1,18,000 total), depositing it with authorities. Tenants can claim ITC if used for business.[1][3]
- Co-working spaces, short-term business rentals: 18% GST.[1]
- Furniture/equipment rentals bundled: Also 18%.[1]
- Maintenance charges by RWAs: 18% if exceeding Rs. 7,500 per flat monthly or Rs. 20 lakh annual turnover.[2]
Practical Tips for Landlords and Tenants in 2026
Compliance is key: Maintain usage declarations in agreements to prove residential intent. Registered tenants under RCM self-assess and pay GST, claiming ITC where possible.[4][5]
Calculation: GST = Rent × 18%. For Rs. 50,000 monthly commercial rent, annual GST = Rs. 1,08,000.[4]
- Claim ITC on property-related expenses like repairs for commercial rentals.[1]
- Avoid penalties by checking tenant GST status upfront.[3]
- No GST on parking if bundled; separate charges attract tax.[2]
Other services like vehicle leasing or land for business also draw 18% GST, but pure residential remains untouched.[1]
In summary, the line is clear: living exempts, business taxes. Consult a CA for nuanced cases to ensure seamless compliance in 2026.