by EpicInfrateck 
If you’re a property owner or landlord in India, understanding the Goods and Services Tax (GST) on rental income from commercial property is crucial for proper tax planning and compliance. In 2024, the GST regime continues to impact rental income, particularly from commercial properties. This guide will cover everything you need to know about GST on commercial property rentals, helping you navigate the tax landscape and maximize your benefits.
1. GST Applicability on Rental Income from Commercial Property
Is GST applicable on rental income from commercial property?
Yes, GST applies to all rental income generated from commercial properties. This includes office spaces, retail stores, factories, and warehouses. Renting out commercial properties is considered a taxable service under the GST law.
Residential vs. Commercial Rentals:
- Commercial Property Rentals: Subject to GST.
- Residential Property Rentals: Exempt from GST if rented for residential purposes. However, if a residential property is rented for commercial use, it is subject to GST.
2. GST Threshold Limit for Rental Income
What is the GST threshold limit for rental income?
If your total rental income (along with other taxable income) exceeds ₹20 lakh annually (or ₹10 lakh in special category states), you must register for GST and comply with its provisions.
GST Registration for Landlords:
Once registered, landlords must charge and collect GST on rental income from commercial properties, file returns, and pay the applicable taxes. The threshold includes both rental income and any other income you may earn from supplying taxable services.
3. GST Rate on Commercial Property Rentals
What is the GST rate for rental income from commercial property?
In 2024, the GST rate for renting out commercial properties remains at 18%. This tax rate is split into:
- 9% Central GST (CGST)
- 9% State GST (SGST), or
- 18% Integrated GST (IGST) for inter-state transactions.
Example of GST Calculation: If your monthly rental income is ₹1,00,000, the GST would be ₹18,000, making the total payable amount ₹1,18,000.
4. Input Tax Credit (ITC) on Commercial Property Rentals
Can landlords claim Input Tax Credit (ITC)?
Yes, landlords renting out commercial properties can claim Input Tax Credit (ITC) on the GST paid for expenses related to the rental property. These expenses might include repairs, maintenance, or property management services.
ITC Eligibility Criteria:
- ITC can only be claimed if the property is rented for commercial use.
- ITC is not applicable on residential property rentals, even if the tenant is using the property for business purposes.
By claiming ITC, landlords can reduce their overall GST liability, making it a key benefit under the GST regime.
5. Reverse Charge Mechanism (RCM) on Rental Income
Does Reverse Charge Mechanism (RCM) apply to commercial rentals?
Under certain conditions, the Reverse Charge Mechanism (RCM) applies to rental income from commercial properties. Under RCM, the tenant, rather than the landlord, is responsible for paying the GST directly to the government.
RCM Conditions:
- The tenant must be a GST-registered business entity.
- RCM is typically applicable in special cases outlined by GST law.
For most regular commercial property rentals, GST is charged by the landlord, and RCM does not apply.
6. Time of Supply for GST on Rental Income
When is GST payable on rental income?
GST is payable at the time of supply, which refers to the earlier of the following:
- The date of issuing the invoice
- The date of receiving payment
Landlords should issue GST-compliant invoices and ensure that the taxes are paid on time to avoid penalties.
