A detailed overview of GST implications on commercial rent highlights different scenarios based on landlord registration status and tenant type. Here’s a breakdown:
Registered Landlords
For landlords registered under GST, a 18% GST is charged on commercial rent. The tenant pays rent plus GST to the landlord, who is responsible for discharging the GST liability to the government.
Unregistered Landlords
If the landlord is unregistered, the responsibility to pay GST falls on the tenant, provided the tenant is registered under GST. In this case, the tenant pays GST directly to the government under the Reverse Charge Mechanism (RCM).
Tenant Composition Scheme
Tenants under the GST composition scheme bear the GST cost as an additional expense, as they are not eligible for Input Tax Credit (ITC). However, regular taxpayers can claim ITC on the GST paid under RCM.
Small Landlords
RCM does not apply to landlords who fall below the GST registration threshold (₹20 lakh or ₹10 lakh in special category states). Additionally, if both the landlord and tenant are unregistered, GST is not applicable.
ITC for Tenants
Tenants paying GST under RCM can claim ITC, but only if the rented property is used for business purposes.
Rate of CGST
The GST rate on commercial rent remains 18%, regardless of whether it is paid by the landlord or through RCM.
SAC Code
The Service Accounting Code (SAC) for renting immovable property is 997212, covering both short-term and long-term leases.
This overview provides clarity on GST obligations for landlords and tenants, including conditions for ITC and exemptions for small landlords.
