GST Rate for Renting Immovable Property in FY 2026-27

Introduction

The GST rate for renting immovable property is an important consideration for landlords, tenants, businesses, and property owners. Under the Goods and Services Tax (GST) regime, renting of immovable property is generally treated as a supply of services. However, the GST implications vary depending on the type of property, the purpose of use, and the GST registration status of the parties involved. Understanding the GST rate for renting immovable property is essential for ensuring compliance and avoiding penalties.

As of FY 2026-27, the GST rate for renting immovable property continues to be governed by the CGST Act, 2017, along with notifications and circulars issued by the Government from time to time. While commercial property rentals generally attract GST at 18%, certain residential rental transactions continue to enjoy exemption.

Additionally, Reverse Charge Mechanism (RCM) provisions introduced in recent years have significantly impacted GST compliance for rental transactions.

Quick Overview of GST Rate for Renting Immovable Property

The GST rate for renting immovable property remains 18% in most taxable rental transactions unless a specific exemption applies.

GST Provisions Applicable to Rental Income in FY 2026-27

The GST rate for renting immovable property has not undergone any rate revision in FY 2026-27. However, taxpayers should consider the impact of important notifications that continue to apply.

The following provisions remain relevant:

• Notification No. 05/2022-Central Tax (Rate), effective from 18 July 2022.
• Notification No. 15/2022-Central Tax (Rate), effective from 1 January 2023.
• Notification No. 09/2024-Central Tax (Rate), effective from 10 October 2024.
• Notification No. 07/2025-Central Tax (Rate).
• Circular No. 245/02/2025-GST dated 28 January 2025.

These provisions continue to influence how the GST rate for renting immovable property is applied in residential and commercial rental arrangements.

What is Renting of Immovable Property Under GST?

Where a rental transaction qualifies as a supply under Section 7 of the CGST Act, 2017, Schedule II classifies leasing, licensing, tenancy, easement rights and renting of land or buildings as a supply of services. GST applies unless the transaction is specifically exempt.

Immovable property may include:

• Residential apartments
• Independent houses
• Office premises
• Shops and retail outlets
• Warehouses
• Industrial buildings
• Commercial complexes

The applicable GST rate for renting immovable property depends on the nature and usage of the property.

What is the GST Rate for Renting Immovable Property in India?

The GST rate for renting immovable property is generally 18% where the rental transaction is taxable under GST law. This rate commonly applies to commercial property rentals and other taxable leasing arrangements. Taxable rental services are generally classified under SAC 9972. The applicable rate is determined under Notification No. 11/2017-Central Tax (Rate), as amended.

However, not every rental transaction attracts GST. Certain residential rental transactions qualify for exemption under Notification No. 12/2017-Central Tax (Rate).

To determine the correct GST rate for renting immovable property, taxpayers should evaluate:

• Whether the property is residential or commercial.
• The purpose for which the property is rented.
• Whether the landlord is GST-registered.
• Whether the tenant is GST-registered.
• Whether any exemption or RCM provision applies.

GST Rate for Renting Immovable Property on Commercial Property Rentals

The GST rate for renting immovable property is generally 18% when commercial premises are rented for business purposes.

Commercial properties typically include:

• Office spaces
• Shops and showrooms
• Warehouses
• Business centers
• Industrial premises
• Commercial complexes
• Co-working spaces

Renting a residential dwelling for use as a residence is generally exempt when the recipient is not registered under GST. However, where the dwelling is rented to a GST-registered person, the registered recipient is ordinarily liable to pay GST under RCM.

Example

A company rents office premises for ₹1,00,000 per month.

In this case, the applicable GST rate for renting immovable property is 18%, and the tenant may claim Input Tax Credit (ITC), subject to GST conditions.

GST Rate for Renting Immovable Property on Residential Property Rentals

The GST rate for renting immovable property differs significantly when residential properties are involved.

Residential Dwelling Used as Residence

Notification No. 12/2017-Central Tax (Rate) exempts renting of a residential dwelling when it is used as a residence.

Examples of exempt residential renting include: A flat rented to an unregistered individual for personal residence.• A house rented to an unregistered family for residential use.• A dwelling rented by a registered proprietor in a personal capacity for their own residence and not for the proprietorship concern.

The proprietor exception applies only where the proprietor takes the property on their own account, uses it as their own residence and does not rent it for the business.

In these situations, the GST rate for renting immovable property is effectively nil because the supply is exempt.

Residential Property Used for Business Purposes

If a residential property is rented for use as an office, clinic, guest house or other business premises, the residential-use exemption may not apply. When the landlord is registered, GST is generally charged under forward charge. Where the recipient is registered and the applicable RCM entry covers the transaction, the recipient must pay GST under RCM. The treatment should be determined from the nature of the property, its actual use and the GST status of both parties.

Reverse Charge Mechanism on Residential Property Rentals

One of the most significant developments affecting the GST rate for renting immovable property was introduced through Notification No. 05/2022-Central Tax (Rate).

From 1 January 2023, an exemption applies where a registered proprietor rents a residential dwelling in a personal capacity for use as their own residence and the renting is not on account of the proprietorship concern.

Effective from 18 July 2022, renting of a residential dwelling to a registered person became taxable under Reverse Charge Mechanism (RCM).

Under this provision:

• The landlord does not collect GST.
• The registered recipient is liable to pay GST.

GST is payable under RCM, subject to applicable provisions, notifications, and clarifications.

Example

An individual rents a residential apartment to a GST-registered company for employee accommodation. Eligibility for ITC on employee accommodation is not automatic. It must be evaluated under Sections 16 and 17, including restrictions relating to personal consumption and non-business use.

In such a case:

• The GST-registered company is generally liable to discharge GST at 18% under RCM. The landlord does not collect GST on the rent.
• The landlord is not required to charge GST separately.
• The applicable GST rate for renting immovable property remains 18%, subject to applicable GST provisions.
• This requirement continues to apply in FY 2026-27.

GST Rate for Renting Immovable Property Under RCM for Commercial Property

Notification No. 09/2024-Central Tax (Rate), dated 8 October 2024 and effective from 10 October 2024, brought renting of immovable property other than a residential dwelling by an unregistered supplier to a registered recipient under RCM.

Under this notification, renting of commercial immovable property by an unregistered supplier to a registered recipient is covered under Reverse Charge Mechanism.

The provision applies where:

• The landlord or supplier is unregistered.
• The property is an immovable property other than a residential dwelling.
• The tenant or recipient is registered under GST.
• The recipient is not excluded from the entry by a subsequent notification.

In such cases:

• The registered tenant becomes liable to pay GST under RCM.
• The landlord does not charge GST.
• The applicable GST rate for renting immovable property remains 18%.

Example

An unregistered individual rents a commercial shop to a GST-registered business.

The registered business must generally pay GST at 18% under RCM, unless it is an eligible composition taxpayer excluded from Entry 5AB.

Important Relief for Composition Taxpayers

Notification No. 07/2025-Central Tax (Rate) excluded taxpayers registered under the composition levy from Entry 5AB. Accordingly, a composition taxpayer is not required to pay GST under this specific RCM entry when renting immovable property other than a residential dwelling from an unregistered landlord.

This exclusion is limited to Entry 5AB and should not be treated as a general exemption from every rental-related RCM liability.

This amendment is an important consideration while determining the GST rate for renting immovable property and the corresponding GST liability.

CBIC Clarification on GST Rate for Renting Immovable Property

To address practical issues arising from the implementation of these provisions, CBIC issued Circular No. 245/02/2025-GST dated 28 January 2025.

The circular clarified various aspects relating to the GST rate for renting immovable property, including implementation of RCM provisions and compliance obligations for taxpayers.

Businesses and property owners should review these clarifications while evaluating their GST position.

GST Registration Requirements for Rental Income

The GST rate for renting immovable property is often discussed alongside GST registration requirements.

A landlord making taxable rental supplies generally requires GST registration when aggregate turnover exceeds ₹20 lakh in a financial year. The limit is ₹10 lakh in specified special-category states. Aggregate turnover is calculated on a PAN-India basis and generally includes taxable and exempt supplies, subject to the CGST Act.

Many taxpayers incorrectly assume that earning rental income automatically requires GST registration. However, registration requirements depend on multiple factors.

GST registration liability should be determined after considering:

• Aggregate turnover.
• Nature of supplies.
• Availability of exemptions.
• Place of supply provisions.
• Applicability of reverse charge provisions.
• Other relevant GST requirements.

A person making exclusively exempt residential rental supplies may not require registration under Section 23. However, compulsory-registration provisions, RCM transactions and other taxable supplies must also be examined before reaching a conclusion.

Therefore, the GST rate for renting immovable property should always be evaluated together with the registration provisions applicable to the taxpayer.

Input Tax Credit on Rental Transactions

The GST rate for renting immovable property also affects Input Tax Credit eligibility for businesses.

Businesses may generally claim ITC on GST paid in relation to commercial property rentals used for business purposes, subject to the conditions prescribed under GST law.

ITC may be available on:

• Office premises.
• Warehouses.
• Commercial establishments.
• GST paid under Reverse Charge Mechanism, where eligible.

To claim ITC, taxpayers must comply with Section 16 of the CGST Act and maintain proper documentation.

Where GST is paid at the applicable GST rate for renting immovable property, valid invoices and records should be retained to support ITC claims.

Exemptions Related to GST Rate for Renting Immovable Property

Although the standard GST rate for renting immovable property is 18% for taxable transactions, several exemptions continue to exist.

The most significant exemption applies to residential dwellings rented for use as a residence.

Depending on the facts of the case, exemptions may also be available to:

• Certain charitable institutions.
• Religious organizations.
• Specific government-notified services.

Taxpayers should carefully review the relevant notification before claiming exemption from the GST rate for renting immovable property.

Stay GST Compliant with Ebizfiling’s Expert Assistance

Determining the correct GST rate for renting immovable property requires an understanding of GST law, notifications, exemptions, registration requirements, and RCM provisions. EbizFiling assists businesses, landlords, and property owners with GST registration, GST return filing, GST advisory, GST notice handling, and compliance management. Our experts help taxpayers determine the applicable GST rate for renting immovable property and comply with the latest GST provisions.

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Conclusion

The GST rate for renting immovable property in FY 2026-27 continues to be 18% for most taxable rental transactions. However, GST liability depends on the nature of the property, its use, available exemptions, and the GST registration status of the landlord and tenant. While residential dwellings used as residences remain exempt in specified cases, businesses and property owners must carefully evaluate the impact of Notification No. 05/2022-Central Tax (Rate), Notification No. 09/2024-Central Tax (Rate), Notification No. 07/2025-Central Tax (Rate), and Circular No. 245/02/2025-GST. Proper analysis of these provisions will help determine the correct GST rate for renting immovable property and ensure compliance with GST law.

Frequently Asked Questions