How GST on Rent Works: RCM, ITC and Compliance in 2026

Rent is one of those business expenses that looks simple on paper but can create surprisingly complicated GST questions.

You pay the landlord every month. You record the rent in your books. Done, right?

Not always.

A business may rent an office, shop, warehouse, factory, godown, co-working space, or even a residential flat for an employee. The GST treatment can change depending on what type of property is rented, who the landlord is, whether the tenant is GST-registered, whether the tenant is under the composition scheme, and how the property is being used.

This is particularly important after two major changes in the GST framework:

• From 18 July 2022, renting of a residential dwelling to a registered person was brought under Reverse Charge Mechanism (RCM), subject to the specific exemption for a proprietor taking a dwelling in their personal capacity for their own residence.
• From 10 October 2024, renting of an immovable property other than a residential dwelling by an unregistered person to a registered person was brought under RCM. The rule was subsequently modified from 16 January 2025 to exclude taxpayers who have opted for the composition levy from that RCM entry.

So, if you are asking, “Is GST applicable on rent?”, the honest answer is: it depends.

This guide explains GST on rent in 2026, including commercial and residential rent, RCM, Forward Charge Mechanism (FCM), Input Tax Credit (ITC), self-invoicing, GSTR-3B reporting, place of supply, composition taxpayers, and practical examples.

• List of Documents Required for GST Registration

Is Rent Taxable Under GST?

Yes, renting of immovable property is generally treated as a supply of service under GST.

Schedule II to the CGST Act specifically treats renting of immovable property as a supply of services. Therefore, GST can apply when a property is rented, leased, licensed, or otherwise provided for use in circumstances covered by the GST law.

For most taxable renting services discussed in this article, the applicable GST rate is 18%.

However, you should not assume that every rent payment automatically attracts GST.

The GST treatment depends on the transaction.

For example:

• An individual renting a residential flat to another unregistered individual for living purposes generally does not pay GST on that rent.
• A GST-registered business taking an office from a registered landlord generally receives the rent service under Forward Charge.
• A GST-registered business taking a commercial property from an unregistered landlord can become liable under RCM.
• A GST-registered person taking a residential dwelling for business purposes can also become liable under RCM.
• A composition taxpayer is specifically excluded from the commercial-rent RCM entry introduced in 2024.

Therefore, the first step is not to calculate 18%.

The first step is to identify the nature of the property and the GST status of both parties.

When Is GST Not Applicable on Rent?

There are important situations where GST may not apply.

Residential Dwelling Rented to an Unregistered Person for Residence

Renting a residential dwelling for use as a residence is generally exempt when the recipient is not registered under GST.

For example, suppose an individual owns an apartment and rents it to a salaried employee who is not registered under GST and uses the property as their home.

The rent is generally exempt from GST.

This is the common residential rental arrangement most people are familiar with.

However, the position changes when the tenant is a registered person.

• Also Read: How to Add an Additional Place of Business on the GST Portal

Agricultural Land Used for Agricultural Purposes

Certain supplies involving agricultural land are covered by GST exemptions, subject to the specific conditions of the exemption notification.

Therefore, the nature and actual use of the land must be examined before concluding that GST is payable.

GST on Commercial Property Rent

Commercial property rental generally attracts GST at 18%.

Commercial property can include:

• Office premises
• Retail shops
• Showrooms
• Warehouses
• Godowns
• Factories
• Commercial buildings
• Business premises
• Other non-residential immovable property

The important question is not simply whether the property is commercial.

You must also determine:

1. Is the landlord registered under GST?
2. Is the tenant registered under GST?
3. Is the tenant under the composition scheme?
4. Is GST being charged under Forward Charge?
5. Does RCM apply?

Let’s break down the major situations.

Scenario 1: Registered Landlord and Registered Tenant

Suppose your business rents an office from a landlord who is registered under GST.

In a normal taxable commercial-rent transaction, the landlord charges GST under the Forward Charge Mechanism (FCM).

The landlord issues a tax invoice showing:

• Basic rent
• GST rate
• CGST and SGST, where applicable, or IGST
• Total invoice value
• GSTINs of the parties

Example

Your company rents an office for:

Monthly rent = ₹1,00,000

GST at 18%:

GST = ₹18,000

Total amount payable to the landlord:

₹1,18,000

The landlord collects the ₹18,000 GST and is responsible for reporting and paying the applicable tax.

If the tenant satisfies the conditions for ITC, the GST charged by the landlord may be available as Input Tax Credit.

This is the straightforward Forward Charge model.

Scenario 2: Registered Tenant and Unregistered Landlord for Commercial Property

This is where the rules changed significantly.

From 10 October 2024, Notification No. 09/2024-Central Tax (Rate) introduced Entry 5AB into the reverse-charge notification. It covers renting of immovable property other than a residential dwelling supplied by an unregistered person to a registered person. (Tax Information)

In simple language:

Unregistered landlord + registered tenant + non-residential property = RCM, subject to the composition-taxpayer exclusion discussed below.

Example

Suppose your GST-registered business rents a warehouse from an individual landlord who is not registered under GST.

Monthly rent:

₹50,000

GST at 18%:

₹9,000

The landlord does not charge GST on the rent because the landlord is unregistered.

Instead, the registered tenant becomes responsible for paying the applicable GST under RCM.

The tenant therefore needs to account for:

₹50,000 × 18% = ₹9,000 GST

The RCM tax must be discharged through the prescribed GST payment mechanism.

Subject to the normal ITC conditions, the tenant may subsequently claim eligible ITC of the RCM tax paid.

Why the 2024 RCM Change Matters

Before the October 2024 change, businesses generally focused on whether the landlord was registered and whether the rental service was otherwise taxable.

The introduction of Entry 5AB shifted the compliance responsibility for certain commercial-property rentals from the unregistered landlord to the registered recipient.

That means a business cannot simply say:

“My landlord isn’t registered, so there is no GST.”

That assumption can be wrong.

For a registered tenant taking a non-residential immovable property on rent from an unregistered person, RCM must now be specifically examined.

The change is particularly relevant for:

• Small businesses renting shops
• Startups renting offices
• Traders renting godowns
• Manufacturers renting factories
• Businesses leasing warehouses
• Professionals renting commercial premises

Scenario 3: Both Landlord and Tenant Are Unregistered

If both parties are unregistered and the transaction does not otherwise trigger a specific GST liability, there is generally no GST collection under the normal commercial-rent mechanism.

For example, an unregistered small business rents a shop from an unregistered property owner, and neither party is otherwise required to register.

The tenant does not become liable merely because rent is being paid.

However, GST registration requirements and any other compulsory-registration provisions must always be checked separately.

Scenario 4: Composition Taxpayer Renting Commercial Property from an Unregistered Landlord

This is an important 2026 update.

When Entry 5AB was introduced in October 2024, commercial rent supplied by an unregistered person to a registered person came under RCM.

However, Notification No. 07/2025-Central Tax (Rate), effective 16 January 2025, amended Entry 5AB to exclude a person who has opted to pay tax under the composition levy from the recipient category.

Therefore, from 16 January 2025, a composition taxpayer is excluded from this specific RCM obligation for commercial or other non-residential immovable property rented from an unregistered person.

The 55th GST Council had recommended this exclusion and also recommended regularisation of the intervening period from 10 October 2024 to 15 January 2025 on an “as is where is” basis. 

This distinction is important because many older articles still state that every registered person must pay RCM on commercial rent from an unregistered landlord.

That is not the complete 2026 position.

GST on Residential Property Rent

Residential rent requires a separate analysis because the GST treatment changed significantly from 18 July 2022.

Before that date, renting of residential dwellings for use as residence was generally covered by the exemption framework.

The rules changed when Notification No. 05/2022-Central Tax (Rate) inserted Entry 5AA into the RCM notification. It covers renting of a residential dwelling to a registered person. The amendment became effective from 18 July 2022. 

This means a registered business cannot automatically assume that residential rent is GST-free.

Residential Rent to an Unregistered Person

If an individual rents a residential dwelling to an unregistered person for use as a residence, the rental service continues to fall within the applicable exemption framework.

Example

Mr. A owns a residential apartment.

He rents it to Ms. B, who is an unregistered salaried employee, for ₹25,000 per month to use as her home.

Generally:

Rent = ₹25,000

GST = Nil

The landlord does not add 18% GST merely because rent is being received.

Residential Rent Paid by a GST-Registered Person

The situation changes when the tenant is a registered person.

Entry 5AA covers renting of a residential dwelling to a registered person under RCM. The current exemption notification also contains a specific exception for a proprietor of a proprietorship concern who rents the dwelling in their personal capacity for their own residence and on their own account, rather than on account of the proprietorship concern. (CBIC GST)

This distinction is extremely important.

A registered proprietor does not automatically become liable merely because they possess a GST registration.

The purpose and capacity in which the residential property is rented matter.

Personal Residence vs Business Use: Why the Distinction Matters

Consider two different situations.

Situation A: Personal Residence

A proprietor has GST registration for their consulting business.

They personally rent a flat in Bengaluru to live with their family.

The lease is taken in their personal capacity and the premises are used as their own residence.

The specific exemption for this situation can apply.

Situation B: Business Accommodation

The same business rents a residential apartment in the firm’s name and uses it to accommodate an employee or business personnel.

This is a different fact pattern.

The rental is connected with the business, so the residential-rent RCM provisions need to be examined.

This is why simply looking at the word “residential” on the rental agreement is not enough.

You must examine:

• Who is the tenant?
• Who is paying the rent?
• In whose name is the agreement?
• Why is the property being rented?
• Who is using the property?
• Is it being taken on the business’s account or in a personal capacity?

GST on Residential Property Used for Commercial Purposes

Another common source of confusion is the difference between the property’s physical character and its actual use.

Suppose a residential-looking property is rented by a business and used as:

• An office
• A clinic
• A studio
• A training centre
• A commercial workspace

The GST treatment cannot be determined merely by calling it a “residential flat.”

The actual terms of the rental arrangement and use of the premises must be examined.

In such cases, professional GST advice can be useful because the classification of the rental service and the applicable charge mechanism can affect both the landlord and tenant.

Commercial Rent vs Residential Rent: Quick Comparison

Particular	Commercial / Non-Residential Property	Residential Dwelling
General GST rate when taxable	18%	18%
Registered landlord → registered tenant	Generally FCM	RCM rules for residential dwelling to registered person apply
Unregistered landlord → registered tenant	RCM under Entry 5AB, subject to composition exclusion	RCM under Entry 5AA
Unregistered landlord → unregistered tenant	Generally no GST under these RCM entries	Generally exempt when rented for residence
Composition taxpayer	Excluded from Entry 5AB RCM from 16 Jan 2025	Residential-rent rules require separate examination
Personal residence of proprietor	Not generally relevant	Specific exemption can apply where conditions are satisfied
ITC	Subject to Section 16 and other restrictions	Subject to eligibility and business-use conditions

The key point is simple:

Commercial and residential rent should not be treated identically.

Commercial rent from an unregistered landlord can trigger Entry 5AB RCM, while residential rent to a registered person is governed by Entry 5AA. (CBIC GST)

What Is Reverse Charge Mechanism on Rent?

Under the normal Forward Charge Mechanism, the supplier collects GST from the customer and pays it to the government.

RCM turns that arrangement around.

Under Reverse Charge Mechanism, the recipient becomes responsible for paying GST for notified supplies. CBIC describes RCM as a mechanism where the liability to pay tax shifts from the supplier to the recipient for specified categories of supplies. (CBIC GST)

Think of it this way:

Forward Charge:
Landlord → collects GST → pays GST to Government

Reverse Charge:
Tenant → calculates GST → pays GST to Government

This distinction is critical when maintaining rental accounts and filing GSTR-3B.

How RCM on Rent Works in Practice

Where RCM applies, the tenant should follow a proper compliance process.

Determine the taxable rent

Start with the value of the rental service.

For example:

Monthly rent = ₹50,000

Calculate GST

At 18%:

₹50,000 × 18% = ₹9,000

For an intra-State transaction, this would generally be:

• CGST: ₹4,500
• SGST: ₹4,500

For an inter-State supply, IGST would generally be ₹9,000, subject to the applicable place-of-supply rules.

Pay the landlord the contractual rent

The landlord receives the agreed rent. Where RCM applies because the supplier is unregistered, the landlord does not collect the RCM tax from the tenant as an ordinary GST-registered supplier would under FCM.

Account for the RCM liability

The registered recipient reports the RCM liability in the appropriate GST return and pays the tax through the prescribed mechanism.

Evaluate ITC

After payment, eligible taxpayers can evaluate whether the RCM tax qualifies for ITC under the normal input-tax-credit provisions.

CBIC’s return guidance specifically provides for RCM liability in Table 3.1(d) of GSTR-3B and eligible RCM credit in Table 4(A)(3). (CBIC GST)

Does RCM Have to Be Paid Through the Cash Ledger?

Yes.

A crucial practical point is that the GST liability under RCM must be discharged through the prescribed cash-payment mechanism rather than simply using existing ITC to discharge the RCM liability.

This is why businesses should maintain sufficient cash balance or plan their GST payments properly.

The cash-flow effect may later be neutral where the recipient is fully eligible to claim the corresponding ITC, but the initial RCM tax payment still has to be made correctly.

Can GST Paid Under RCM on Rent Be Claimed as ITC?

Potentially, yes.

GST paid under RCM can qualify as input tax where the statutory conditions for ITC are satisfied.

For example, if a GST-registered business rents a commercial office for carrying out taxable business activities and pays GST under RCM, the tax may generally be available as ITC, subject to the requirements and restrictions under the GST law.

However, RCM payment does not automatically mean ITC is available.

The business must examine:

• Whether it is registered under the normal scheme.
• Whether the property is used in the course or furtherance of business.
• Whether the outward supplies are taxable or zero-rated.
• Whether any blocked-credit provision applies.
• Whether proportionate reversal is required.
• Whether the relevant documentation and return reporting are maintained.

GSTR-3B Reporting for GST on Rent Under RCM

Correct return reporting is an essential part of rent compliance.

Where RCM applies, the tenant needs to report the applicable liability in Table 3.1(d) of GSTR-3B and discharge the tax appropriately.

Eligible ITC on RCM supplies is reflected through Table 4(A)(3), subject to the applicable ITC conditions. (CBIC GST)

This creates an important distinction between:

Tax liability: Paid under RCM.

ITC: Claimed separately after satisfying the conditions for credit.

A common mistake is to treat the RCM liability and ITC as if they cancel each other before payment.

They do not.

The correct compliance sequence matters.

Input Tax Credit on GST Paid on Rent

One of the biggest questions businesses have after understanding RCM is simple:

“I have paid GST on rent. Can I claim it back as ITC?”

The answer can be yes, but ITC is not automatic.

A registered taxpayer must satisfy the conditions under Section 16 of the CGST Act and must also ensure that none of the restrictions under Section 17(5) apply.

If a business rents premises for making taxable or zero-rated outward supplies, GST paid on eligible rent can generally qualify for ITC, subject to the applicable conditions.

For example, a GST-registered consulting company rents an office for ₹80,000 per month and pays ₹14,400 GST under RCM.

If the office is genuinely used for the company’s taxable consulting business and the other ITC requirements are satisfied, the company can generally claim the eligible ₹14,400 as ITC.

However, the accounting and return reporting must be done correctly.

Basic Conditions for Claiming ITC on Rent

Before claiming ITC, a taxpayer should verify that:

• The taxpayer is registered under the regular GST scheme.
• The rental service is used in the course or furtherance of business.
• The GST has actually been paid to the Government where RCM applies.
• The taxpayer has appropriate supporting documentation.
• The transaction is properly recorded in the books.
• The relevant GST return requirements have been complied with.
• The credit is not specifically blocked under Section 17(5).
• Any required proportionate reversal has been made.

The important lesson is that paying GST is only one part of the ITC process.

When ITC on Rent Is Generally Available

ITC may generally be available when rented premises are used for taxable business activities.

Examples include:

• Office used by a consulting firm
• Warehouse used by a taxable trader
• Shop used for taxable retail sales
• Factory used for taxable manufacturing
• Branch office supporting taxable business
• Commercial premises used for taxable services

Example

A GST-registered business rents a commercial office:

Rent = ₹1,00,000

GST:

₹18,000

If the business is eligible for full ITC, the ₹18,000 may be claimed as input tax credit, subject to the normal conditions.

What About GST on Residential Rent Used for Business?

Residential rent requires greater caution.

Suppose a company rents a residential flat for an employee and the transaction falls under the residential-rent RCM provisions.

The company may be able to claim ITC where the expense qualifies as an input service used in the course or furtherance of business and the other statutory conditions are satisfied.

But the taxpayer should not automatically assume that every residential-rent expense qualifies for full ITC.

The actual purpose, accounting treatment, business use, and applicable restrictions should be reviewed.

This is particularly important where the property is used partly for personal purposes.

When ITC on Rent Can Be Restricted or Blocked

Not every GST amount connected with a rented property is eligible for ITC.

Section 17(5) contains specific blocked-credit provisions.

One important restriction relates to goods or services used for construction of an immovable property on the taxpayer’s own account, even where such goods or services are used in the course or furtherance of business, subject to the statutory exceptions.

Therefore, businesses should distinguish between:

Renting an existing property

and

Constructing or creating an immovable property on rented land.

These are not the same thing for ITC purposes.

ITC on Construction or Permanent Improvements to Rented Property

Suppose a company rents a commercial building and then spends ₹20 lakh constructing a permanent structure on the premises.

The GST treatment of the construction-related expenditure must be examined separately.

The fact that the property is rented does not automatically make all construction-related GST eligible for ITC.

Section 17(5)(d) can restrict credit for goods or services used for construction of an immovable property on the taxpayer’s own account, other than plant and machinery, subject to the statutory provisions.

Therefore, before claiming large ITC on:

• Civil construction
• Permanent flooring
• Structural additions
• Building construction
• Permanent fixtures forming part of immovable property

the taxpayer should obtain appropriate professional advice.

ITC on Repairs, Maintenance and Interior Work

Repairs and maintenance require a transaction-by-transaction analysis.

Routine repairs and maintenance of business premises may qualify for ITC where the statutory conditions are met.

However, if an expenditure results in the creation of an immovable property or falls within a blocked-credit category, ITC may not be available.

This distinction is especially important for:

• Office interiors
• Electrical installations
• False ceilings
• Permanent partitions
• Civil work
• Renovation
• Structural improvements

Businesses should avoid claiming ITC merely because the supplier has charged GST.

The nature of the underlying expense matters.

ITC Where the Property Is Used for Exempt Supplies

If a rented property is used to make both taxable and exempt supplies, full ITC may not be available.

The taxpayer may need to calculate proportionate credit and reverse the ineligible portion according to the applicable rules.

For example, suppose a business uses one office for:

• 70% taxable business activities
• 30% exempt business activities

The corresponding ITC may need to be apportioned under the applicable GST rules.

This is why businesses with mixed supplies should maintain proper records of how premises and related expenses are being used.

ITC Where the Property Is Used for Personal Purposes

GST law generally does not allow businesses to claim unrestricted credit for expenses attributable to personal consumption.

Therefore, if a rented property is used partly for business and partly for personal purposes, the taxpayer should examine the applicable ITC restrictions and make the necessary adjustments.

This is particularly relevant for:

• Residential flats
• Guest houses
• Employee accommodation
• Proprietor residences
• Mixed-use premises

The books of accounts should clearly establish the business purpose wherever ITC is claimed.

Self-Invoice Under RCM on Rent

When RCM applies and the supplier is an unregistered person, the registered recipient needs to consider the self-invoicing requirements under the GST law.

Section 31(3)(f) provides for issuance of an invoice by a registered person receiving taxable supplies liable to reverse charge from an unregistered supplier, subject to the applicable provisions.

A self-invoice should contain the prescribed particulars.

These may include:

• Date
• Invoice number
• Recipient’s GSTIN
• Supplier’s name and address
• Description of service
• Taxable value
• Applicable GST rate
• CGST and SGST or IGST
• Reference to reverse charge
• Other prescribed invoice particulars

The exact documentation should be aligned with the current GST rules applicable to the transaction.

What SAC Code Applies to Rental Services?

Rental services fall within the Heading 9972 family of real estate services.

The precise SAC should be selected based on the nature of the rental service.

For example, the relevant classification may distinguish between:

• Rental or leasing of own or leased non-residential property
• Rental or leasing of residential property
• Other real estate services

Businesses should avoid blindly copying a SAC code from an old invoice.

The correct classification should correspond to the actual service being supplied.

Place of Supply for Rental Services

The place-of-supply rule for services relating to immovable property is particularly important for rental transactions.

Under Section 12(3) of the IGST Act, services directly related to immovable property are generally supplied at the location of the immovable property.

This means the location of the rented property becomes critical in determining whether CGST plus SGST or IGST applies.

Example: Property and Supplier in the Same State

Suppose:

• Landlord is located in Karnataka.
• Rented office is located in Karnataka.
• Tenant is registered in Karnataka.

The transaction is generally treated as intra-State, subject to the applicable provisions.

GST would generally be:

• CGST 9%
• SGST 9%

Total:

18%

Example: Property in One State and Supplier in Another

Suppose a property is located in Karnataka but the supplier’s location is in another State.

The place-of-supply rules for immovable-property services must be applied to determine the nature of supply.

Where the supplier’s location and place of supply are in different States, the transaction can become inter-State and IGST may apply.

For RCM transactions involving an unregistered supplier, the recipient must be particularly careful in determining the correct tax type based on the applicable place-of-supply and supplier-location rules.

Does GST Registration of the Landlord Depend Only on Rent?

No.

A landlord’s GST registration requirement depends on the applicable registration provisions and the person’s aggregate turnover, along with any compulsory-registration provisions that may apply.

For many ordinary taxable suppliers, the commonly referenced threshold is ₹20 lakh, with a lower threshold applying in specified special-category States under the applicable provisions.

However, taxpayers should not make registration decisions solely by looking at rental income.

Aggregate turnover includes relevant taxable supplies, exempt supplies, exports, and inter-State supplies, subject to the statutory definition.

Therefore, a landlord earning:

• Commercial rent
• Consultancy income
• Business income
• Other taxable supplies

must consider the combined GST turnover rather than examining rent in isolation.

Does the ₹20 Lakh Threshold Apply to RCM on Commercial Rent?

This is an important distinction.

The landlord’s registration threshold and the tenant’s RCM liability are two different concepts.

A landlord may remain unregistered because their aggregate turnover is below the applicable registration threshold.

That does not automatically mean a GST-registered tenant is free from RCM.

For commercial rent from an unregistered landlord, Entry 5AB specifically shifts the tax liability to the registered recipient, subject to the composition-taxpayer exclusion.

Therefore:

Landlord’s registration threshold ≠ Tenant’s RCM threshold.

There is no general “minimum monthly rent” below which Entry 5AB automatically disappears when its conditions otherwise apply.

Is There a Minimum Rent for RCM?

There is no general ₹20 lakh or ₹40 lakh rent threshold that automatically exempts the registered recipient from an applicable RCM liability.

For example, if the applicable conditions for Entry 5AB are satisfied and the monthly rent is:

₹5,000

the taxpayer cannot simply assume that GST is not payable because the rent is small.

The relevant question is whether the notified RCM entry applies.

The ₹20 lakh registration threshold relates primarily to whether a supplier is required to obtain GST registration under the applicable provisions. It does not function as a blanket RCM exemption for the recipient.

Composition Taxpayers and GST on Rent

Composition taxpayers need special attention.

A person who has opted for the composition scheme cannot claim ITC in the normal manner.

However, for commercial or non-residential immovable property rented from an unregistered supplier, the 2025 amendment to Entry 5AB specifically excluded persons paying tax under the composition levy from the RCM recipient category.

Therefore, the 2026 position should not be explained simply as:

“Every registered tenant pays RCM on commercial rent from an unregistered landlord.”

That statement is incomplete.

The composition status of the tenant must first be checked.

Residential Rent and Composition Taxpayers

Residential rent is governed by a separate RCM entry.

Therefore, the commercial-rent exclusion introduced for composition taxpayers should not automatically be extended to every residential-rent situation.

The exact nature of the residential rental arrangement and the recipient’s status must be examined against the applicable notification.

This is an area where businesses should be particularly careful because older articles often combine the commercial and residential RCM provisions even though they operate under separate entries.

GST on Rent Paid for Employee Accommodation

Employee accommodation is another area where businesses frequently have questions.

Suppose a company rents a residential apartment and provides it to an employee as part of the employment arrangement.

The GST implications should be evaluated based on:

• Who is the tenant?
• Whether the company is the recipient.
• Whether the property is a residential dwelling.
• Whether the rental falls under Entry 5AA.
• Whether ITC conditions are satisfied.
• Whether the accommodation is provided as part of employment.
• Whether any personal-use or blocked-credit issue arises.

The company should not simply classify the payment as “employee welfare” and assume that GST is irrelevant.

The underlying rental transaction needs to be examined separately.

GST on Office Rent Paid to an Individual Landlord

Suppose a company rents an office from an individual property owner.

The landlord is not GST-registered.

The company is GST-registered under the regular scheme.

Because the property is non-residential, the transaction may fall under Entry 5AB RCM, subject to the applicable conditions.

Example

Monthly rent:

₹75,000

GST at 18%:

₹13,500

Intra-State split:

• CGST: ₹6,750
• SGST: ₹6,750

The tenant accounts for the RCM liability and, where eligible, may claim the corresponding ITC after satisfying the relevant conditions.

GST on Warehouse Rent

Warehouse rental is particularly important for traders, manufacturers, distributors and e-commerce businesses.

Suppose a registered business rents a warehouse from an unregistered property owner.

If the warehouse is a non-residential property, Entry 5AB must be examined.

For example:

Monthly warehouse rent = ₹1,50,000

GST at 18%:

₹27,000

Where RCM applies, the tenant accounts for the ₹27,000 GST.

If the warehouse is used exclusively for taxable business supplies and all ITC conditions are met, the tenant may generally claim the eligible GST as ITC.

GST on Shop Rent

Retailers frequently rent shops from individual property owners who may not have GST registration.

From October 2024, this became an important compliance area because commercial rent from an unregistered landlord to a registered tenant can fall under Entry 5AB RCM.

Therefore, a retailer should maintain:

• Rental agreement
• Rent payment records
• Landlord details
• GST registration status of landlord
• Self-invoice documentation where required
• RCM calculation
• GSTR-3B reporting
• ITC records

This documentation becomes particularly useful during a GST audit or departmental inquiry.

GST on Rent Paid Through a Security Deposit

A security deposit should not automatically be treated as rental consideration.

Its GST treatment depends on its nature and whether it is:

• Refundable
• Adjustable against rent
• Forfeited
• Treated as consideration
• Applied against damages or other charges

Businesses should distinguish a genuine refundable security deposit from an amount that is effectively consideration for a taxable supply.

If the deposit is subsequently adjusted against rent, the GST implications should be evaluated at that point.

GST on Maintenance Charges Along With Rent

Rent agreements often include additional amounts for:

• Maintenance
• Security
• Common-area expenses
• Parking
• Electricity
• Facility management

These charges should not automatically be bundled together without checking their contractual and GST treatment.

The taxpayer should determine:

• Who is providing the service?
• Is the charge part of the rental consideration?
• Is it separately billed?
• Who is the supplier?
• Is the supplier registered?
• Does RCM apply to the particular service?

A proper invoice and accounting trail can prevent confusion later.

Worked Example: Commercial Office Under RCM

Consider a GST-registered trading company in Bengaluru.

It rents an office from an unregistered individual.

Monthly rent

₹60,000

GST at 18%

₹10,800

Intra-State tax

CGST = ₹5,400

SGST = ₹5,400

The tenant pays the contractual rent to the landlord and accounts for the applicable RCM liability.

The ₹10,800 RCM tax is paid through the prescribed mechanism.

If the business uses the office for taxable outward supplies and meets all ITC requirements, it can evaluate claiming ₹10,800 as ITC.

Important

The ITC does not eliminate the requirement to first discharge the RCM liability correctly.

The tax payment and subsequent credit are separate compliance steps.

Worked Example: Residential Flat Taken by a Company

Suppose a company rents a residential flat for accommodation of an employee.

Monthly rent:

₹25,000

If Entry 5AA applies, GST at 18% would be:

₹4,500

For an intra-State transaction:

• CGST = ₹2,250
• SGST = ₹2,250

The company should determine the applicable RCM liability, report it correctly, and separately evaluate ITC eligibility.

Whether the ₹4,500 is fully creditable depends on the applicable ITC provisions and the actual business circumstances.

Therefore, businesses should not assume that “RCM paid = automatic ITC.”

Income Tax TDS on Rent Is Separate From GST

Another common source of confusion is TDS.

GST and Income Tax TDS are two separate compliance obligations.

A business may have to deal with both depending on the facts.

For example, if rent is ₹1,00,000 and GST is ₹18,000, the applicable income-tax TDS rules generally require the tenant to consider TDS on the rent component rather than simply calculating TDS on the gross amount including GST, where GST is separately indicated.

The applicable TDS section, threshold, rate and compliance requirements should be checked based on the taxpayer, recipient and relevant financial year.

This is especially important because income-tax law has undergone changes, including the transition to the Income-tax Act, 2025 framework.

Therefore, businesses should avoid relying on old articles without checking the law applicable to the relevant period.

GST on Rent: Practical Compliance Checklist

Businesses can use the following checklist every month.

• Confirm whether the landlord is GST-registered.
• Identify whether the property is residential or non-residential.
• Check whether the tenant is under the regular or composition scheme.
• Determine whether FCM or RCM applies.
• Verify the applicable GST rate.
• Determine the correct place of supply.
• Calculate RCM correctly where applicable.
• Prepare required self-invoice documentation.
• Report RCM liability correctly in GSTR-3B.
• Pay RCM through the prescribed payment mechanism.
• Evaluate ITC eligibility separately.
• Reverse any ineligible or proportionate ITC where required.
• Maintain the rental agreement and supporting records.
• Reconcile rent expenses with GST records.
• Review changes in landlord GST registration status.

Common Mistakes Businesses Make With GST on Rent

When dealing with GST on rent, businesses should avoid these common compliance mistakes:

• Assuming Every Rent Payment Is GST-Free: Commercial and residential rent are subject to different GST rules. Businesses should determine the nature of the property and the applicable GST provisions before deciding whether tax is payable.
• Assuming an Unregistered Landlord Means No GST: This can be risky, particularly after the introduction of Entry 5AB in 2024. In specified cases, RCM may apply when a registered tenant rents non-residential property from an unregistered supplier.
• Ignoring Composition Status: The treatment of composition taxpayers under Entry 5AB was specifically amended in 2025. Businesses should verify the tenant’s GST scheme before determining their RCM liability.
• Claiming ITC Automatically: Payment of GST under RCM does not automatically make the entire amount eligible for Input Tax Credit (ITC). The usual ITC eligibility conditions, documentation requirements, and restrictions continue to apply.
• Using the Wrong Tax Type: Businesses must correctly determine the place of supply and the locations of the supplier and recipient before deciding whether CGST + SGST or IGST applies.
• Not Maintaining Self-Invoice Records: Where self-invoicing is required under RCM, businesses should prepare and maintain the appropriate documents and records rather than relying solely on accounting entries.

Final Conclusion

GST on rent in 2026 cannot be understood through a single rule such as “rent attracts 18% GST.”

The correct GST treatment depends on several moving parts: the type of property, landlord’s registration status, tenant’s registration status, composition status, purpose of use, applicable RCM entry, place of supply and ITC eligibility.

The most important recent changes are the introduction of RCM on certain commercial-property rentals from unregistered suppliers from 10 October 2024 and the subsequent exclusion of composition taxpayers from that specific RCM entry from 16 January 2025. Residential-rent RCM, meanwhile, has applied to renting of residential dwellings to registered persons since 18 July 2022, subject to the specific exemption for a proprietor taking a dwelling in a personal capacity for their own residence. 

For businesses, the safest approach is to review every rental arrangement individually rather than relying on assumptions.

If your business has multiple offices, warehouses, employee accommodation, rented shops or properties from different landlords, maintaining a proper GST rental-compliance process can prevent missed RCM liabilities, incorrect ITC claims and unnecessary notices.

Note: The GST provisions, notifications, rates, RCM rules, ITC provisions and compliance requirements discussed in this article are based on information and notifications issued by CBIC GST and applicable GST law as updated for 2026. 

Need Professional Help With GST on Rent?

Rent-related GST compliance can become complicated when you have multiple properties, unregistered landlords, RCM obligations or ITC claims.

TrueTax Consultants, Bangalore, can assist businesses with  GST registration, GST returns, RCM compliance, ITC reconciliation, GST advisory, notices and ongoing tax compliance.

Whether you are a startup renting your first office or an established business managing multiple commercial properties, professional guidance can help you identify the correct GST treatment and maintain accurate records.

Talk to TrueTax Consultants for reliable GST and tax compliance support in Bangalore.

Frequently Asked Questions About GST on Rent

Is GST applicable on rent in 2026?

GST can apply to rental services, but not every rent payment attracts GST. Commercial rent is generally taxable at 18%, while residential rent has separate exemption and RCM rules. The correct treatment depends on the property type, landlord status, tenant status and purpose for which the premises are rented.

Does a registered tenant pay GST on commercial rent from an unregistered landlord?

Generally, yes, where Entry 5AB applies to renting of non-residential immovable property by an unregistered supplier to a registered recipient. However, composition taxpayers are excluded from this specific RCM entry from 16 January 2025. The transaction should therefore be checked against the current notification and taxpayer status.

Does residential rent attract GST under RCM?

Renting a residential dwelling to a registered person is covered by Entry 5AA under RCM, subject to the applicable provisions and exemptions. A specific exemption applies where a proprietor rents a residential dwelling in their personal capacity for their own residence and not on account of the proprietorship concern.

Can I claim ITC on GST paid under RCM on rent?

Eligible regular taxpayers may generally claim ITC on GST paid under RCM when the rental service is used for business and the conditions under Section 16 are satisfied. However, blocked-credit provisions, exempt supplies, personal use and proportionate reversal requirements must also be considered.

Do composition taxpayers pay RCM on commercial rent from an unregistered landlord?

Composition taxpayers are excluded from the specific Entry 5AB RCM obligation for renting of non-residential immovable property by an unregistered person, with effect from 16 January 2025. This rule should not automatically be extended to other RCM categories, including residential-rent transactions covered separately.

Is there a minimum rent amount for RCM on commercial property?

There is no general minimum monthly rent threshold that automatically removes an applicable Entry 5AB RCM liability. If the prescribed conditions are satisfied, the registered recipient must consider RCM even when the monthly rental amount is relatively small. The landlord’s registration threshold is a separate issue.

Who pays GST on commercial rent when the landlord is registered?

Where the registered landlord supplies taxable commercial rental services under Forward Charge, the landlord generally charges GST on the rent through the tax invoice and pays the applicable tax to the Government. The registered tenant can evaluate ITC subject to the normal GST credit conditions and restrictions.

Does GST apply when an individual rents a house to another individual?

Residential rent paid by an unregistered person for use of a residential dwelling as a residence is generally exempt under the applicable GST exemption. Therefore, an ordinary individual renting a home for personal residential use generally does not pay 18% GST merely because rent is being paid.

Does RCM on rent have to be paid from the cash ledger?

RCM liability must be discharged through the prescribed payment mechanism and cannot simply be settled using existing input tax credit as though it were ordinary output-tax liability. After paying eligible RCM tax, a regular taxpayer can separately evaluate and claim the corresponding ITC subject to applicable conditions.

What should a business maintain for GST on rent?

Businesses should maintain rental agreements, landlord details, GST registration status, invoices or receipts, self-invoices where applicable, RCM calculations, payment records, GSTR-3B reporting and ITC documentation. Maintaining a clear audit trail helps substantiate the GST treatment adopted during reconciliation, audit or departmental verification.