07 Nov 2019Posted By: Mudit Handa

All about GST on Rental Income from Commercial Property

Real estate is indeed one of the most significant industries in our economy. Today, it has risen as a profitable area and has seen speedy growth in the previous few years. As far as economic growth is concerned, the Realty sector has a massive share in the GDP of India. A rapid growth in this key sector implies rapid GDP growth, thereby widening the employment opportunities as well.

As a matter of fact, the Goods and Service Tax system has advanced the overall ease of doing business in the real estate sector. The GST council has eased the rules for the realtors, builders, and constructors having GST registration so that certain hindrances are ruled out that they were confronting earlier. 

Concentrating on their drive of "Housing for All by 2022", the GST council in its 34th meeting that was conducted on the 24th February 2019 brought out a number of reliefs for the buyers of home. With a view to propping up the affordable housing segment in the realty sector, the government had brought down the GST rates significantly.

Here we will discuss the GST provisions on rental income from a Commercial Property.


1. Impact of GST on Rent from a commercial property?

The advent of the Goods and Services Tax (GST) regime has undoubtedly enhanced the ease of doing business in almost every industry.

As we see, the rental income has become a major source of per capita income for several people of middle & higher income groups. Especially, the builders or realtors having GST registration and have leased out their property for commercial use, earn huge returns from it. Hence, we must know about the overall impact of GST on rent or lease rental income.

Let us try to understand when and how GST impacts on the rental income from commercial properties.

2. When is GST exempt on the rental income?

The impact of GST is different in different scenarios. As per the GST law, GST exempt on rental income:-

  • If an immovable residential property is rented out for residential purpose only.
  • However, if an immovable property is rented out for business or commercial use, it will attract GST. I that case, it would be considered as a supply of service.
  • Besides, there is a threshold limit for the applicability of GST on rental income from commercial property. GST shall be applicable only if the annual rental income from a commercial property goes above ₹40 lacs. In that case, GST registration is also mandatory.
  • For hilly & North-Eastern states, the threshold for GST registration and applicability of GST on rental income is ₹20 lacs.                                                                                                        

3. How much GST rate is there on rent from a commercial property?

Any type of lease or rental income earned from an immovable commercial property for business use would attract GST @ 18%.

After GST was implemented, the GST rate of 18% was applicable to the rental income up to ₹20 lakhs from a commercial property. The threshold has been raised to ₹40 lacs as of now.

The realtors, as well as landowners who earn annual rental income up to ₹40 lacs from a commercial property, rented out for business use.                                                                                                                                

4. How will GST apply to Religious or Charitable trusts?

In case there is a charitable trust or a religious institution owns and is managing a religious place for public use, such as a temple, Dharmshala, or a community center, it shall be exempt from GST registration. However, GST registration shall be mandatory for such entity only if-

  • Rent from such spaces (rooms of the inn) is up to ₹1000/- per day.
  • Rent from the shops and other commercial spaces is up to ₹10,000/- per month.
  • Rent from the community centre is up to ₹10,000/- per day.

5. Whether ITC is available on GST on Rent from a commercial property?

Yes, the Input Tax Credit can be claimed on GST paid on rental income from a commercial property rented out for business use.


If you need any help regarding GST registration, feel free to contact our business advisor at 8881-069-069.

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Posted By JAYANT
Posted Date 2020-09-01 18:21:08


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