GST applicability on rent depends on how the property is used, whether it is residential or commercial, as this determines tax exemption.
Residential Properties
For residential properties, GST is completely exempt if the property is used strictly for personal accommodation only.
No GST applies to rent paid for residential dwellings used as residences.
Commercial Properties
If the tenant uses the property for business purpose such as turning it into an office, it becomes "commercial" and GST rules applies, but the mechanism in FCM (Forward Charge Mechanism) or RCM (Reverse Charge Mechanism).
| Scenario | Landlord GST Status | Tenant GST Status | Mechanism | Who Handles GST? |
| FCM | Registered | Any | Forward Charge | Tenant pays landlord (Landlord remits to govt) |
| RCM | Unregistered | Registered | Reverse Charge | Tenant directly to the government |
| No GST | Unregistered | Unregistered | None | No payment required |
Other Scenarios
- Both registered: Landlord charges 18% GST, tenant can claim ITC if used for business.
- Tenant composition dealer but only landlord registered: Landlord charges 18% GST, tenant can't claim ITC.
- Tenant composition dealer but landlord unregistered: Tenant pays 18% GST under RCM.
Conclusion
Residential rent for living means no GST. Commercial rent attracts GST if at least one party (landlord or tenant) is registered under FCM or RCM. Always check usage and registration status first, as this system balances ease for small folks with fair tax on business rents. If your turnover crosses thresholds, get registered to stay compliant.
CAclubindia
