Renting a Shop or Office From an Unregistered Landlord? You Pay GST on the Rent
Since 10 October 2024, a GST-registered tenant renting commercial property from an unregistered landlord pays 18% GST on the rent under reverse charge, in cash, and can claim it as input tax credit if used for taxable business. Composition taxpayers were excluded from January 2025.
Many shops, offices and godowns in India are owned by individuals who are not registered under GST. Since 10 October 2024, when a GST-registered business rents such a property, the tenant pays the GST.
The rule
Under Notification 09/2024-Central Tax (Rate), effective 10 October 2024:
- ✓renting of commercial (non-residential) property
- ✓by an unregistered person
- ✓to a registered person
is taxed under reverse charge. The tenant pays 18% GST on the rent directly to the government.
Composition taxpayers are excluded. After the GST Council's 55th meeting, renting to a composition taxpayer was taken out of this reverse charge from January 2025, with the earlier period regularised.
How it works
- Raise a self-invoice for each month's rent, since the landlord does not issue a tax invoice.
- Pay the GST in cash through GSTR-3B. Reverse-charge tax cannot be paid using input tax credit.
- Claim the same amount as input tax credit in the same return, if the premises are used for taxable business.
For a business making only taxable supplies, the net cost is nil, but the cash has to be paid first.
A worked example
A Navsari garment retailer rents a shop from an unregistered owner at ₹60,000 a month.
| Each month | Amount |
|---|---|
| GST under reverse charge (18%) | ₹10,800, paid in cash |
| Input tax credit | ₹10,800 |
| Net GST cost | Nil |
| Cash tied up until credit is used | ₹10,800 |
Related rules
- ✓Residential property rented to a registered person for business use also attracts reverse charge, since 2022.
- ✓If the landlord is registered, they charge 18% GST on the invoice in the normal way.
- ✓TDS on rent under the income-tax law is separate and still applies.
Frequently asked questions
Is the GST on top of the rent?
Yes. The rent agreement amount is the value; GST is paid by you, the tenant.
What if the landlord has a GST registration in another state?
If the landlord is registered, it is not reverse charge. They must charge GST.
We missed paying it since October 2024. What now?
Pay the tax with interest and claim the credit. Ask your CA about the right return to use.
Sources
- ✓RCM on rent of commercial property under GST, ClearTax
- ✓Reverse charge on commercial property rent from unregistered persons, TaxGuru
- ✓Exclusion of composition dealers from RCM on rent, Taxmann
This is a summary, not legal advice. Confirm with your chartered accountant.
Written by
Founder, Airwix Technologies (Sleet)
Vatsal Sutariya is the founder of Airwix Technologies in Ahmedabad, the company that builds Sleet: SleetHR for HR and payroll, and Sleet Accounting for GST billing and books. He writes about GST, invoicing, business tax and choosing software for Indian businesses, and checks each rule against the official notification before it is published.
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