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GST on commercial rent in India – How GST is levied on renting of commercial rental income in India

By Paras Mehra

( 8.05K Views) July 12, 2017

Pay GST on rent from Commericial property @ 18%

1.0 Introduction

As the businesses are growing as the need for office space is increasing. Many people and companies do open their offices in the residential premises as they get large space with lesser rent. However, for the owners, they will get the GST bite.

We all know that GST shall impact each and every person in India and hence, rental income from commercial property is no exception. Let us discuss how the things work for commercial rental income under GST.

2.0 Applicability of GST on rental income

As per the definition of supply read with schedule under CGST act, renting of immovable property is treated as a supply and hence liable for GST. However, under exemption notification, any residential dwelling rented for residential use is exempted from GST.

But the rent from commercial property is liable for GST.

3.0 Basic exemption Limit for rental income

The basic exemption limit of Rs.20 lakh shall be available to owner. In case, you are earning more than 20 lakh, then GST registration shall be mandatory and liable for GST payment on all the rental income.

In other words, to provide relief to large number of people, government has exempted the population who is earning from commercial rent but where rent is less than 20 lakh.

4.0 Reverse charge if owner not registered

If you are looking for an office space and you find that owner is not registered under GST, then you shall be liable to pay GST on your own under reverse charge.

In simple words, under GST if you buy any services from unregistered supplier, then you shall be required to pay GST instead of the service provider.

5.0 If total rental income from 1 property is less than 20 lakh however, from 3 properties it is 40 lakh, whether GST mandatory?

If the total rental income is more than 20 lakh irrespective of number of properties, then GST registration shall be mandatory and you shall liable to collect and pay GST to the government.

6.0 Composition scheme for person earning rental income

As per section 10 of CGST act, the benefit of composition scheme does not apply to services. Hence, composition scheme benefit does not apply to person earning from rental income.