GST on Rental Services: A Comprehensive Overview with Latest Amendments

Updated on: Dec 17th, 2024| 3 min read

Introduction to GST on Rental Services

Under the Goods and Services Tax (GST) regime, rental services are categorized under supply of services. This applies to both residential and commercial properties. The tax structure has undergone key changes over the years, with the latest amendments in 2024 adding further clarity. This article provides an in-depth analysis of GST applicability, rates, exemptions, and compliance for rental services.

GST Applicability on Rental Income

Residential Property: Renting of residential properties for residential purposes is exempt from GST. However, renting for commercial purposes attracts GST.
Commercial Property: Leasing or renting out commercial spaces attracts GST at the standard rate.

Below is a comprehensive table that covers different case scenarios for registered and unregistered landlords and tenants.

1. Residential Rental Services

Scenario	Landlord	Tenant	GST Applicability
1. Renting for Residential Use	Unregistered	Unregistered	No GST
2. Renting for Residential Use	Registered	Unregistered	No GST
3. Renting for Residential Use	Unregistered	Registered	No GST
4. Renting for Commercial Use	Registered	Registered	18% GST

Key Notes for Residential Rentals

Residential Use: Renting for residential living is exempt from GST, regardless of the registration status of the landlord or tenant.
Commercial Use: Residential properties rented for business purposes (e.g., office or shops) are taxable at 18% GST.
Additional Services: If services like maintenance or parking are provided, GST applies to these services at 18%.

2. Commercial Rental Services

Scenario	Landlord	Tenant	GST Applicability
1. Commercial Property	Registered	Registered	18% GST
2. Commercial Property	Registered	Unregistered	18% GST
3. Commercial Property	Unregistered	Registered	No GST
4. Commercial Property	Unregistered	Unregistered	No GST

Key Notes for Commercial Rentals

Commercial Use: All commercial property rentals (shops, offices, warehouses) attract 18% GST.
Unregistered Landlords: If the landlord is unregistered (turnover below ₹20 lakh), GST does not apply.
Long-Term Industrial Leases: Leases of industrial plots for ≥30 years are exempt under GST.
Input Tax Credit (ITC):
- Tenants who are registered businesses can claim ITC on GST paid for commercial rentals.
- ITC is not available for personal/residential rentals

Conclusion

The GST treatment for residential and commercial properties is clearly outlined, with GST primarily impacting commercial rentals and residential rentals used for business purposes. By segregating cases into the above tables, both landlords and tenants can easily determine GST applicability and compliance requirements.

For landlords crossing the turnover threshold of ₹20 lakh, timely GST registration and proper invoicing are essential to ensure smooth compliance.