GST on Rental Income in India — Residential, Commercial and Co-Working Space

GST on rental income is one of the most commonly misunderstood areas of GST — especially after the 2022 amendment that made residential property rentals taxable in certain situations. Here is a clear, updated guide to GST on rental income for commercial and residential properties in India for 2025.

Commercial Property — Rental (Standard Case)

Renting of commercial property (shops, offices, warehouses, industrial premises) by a registered person to any other person is subject to GST at 18%. The landlord must:

• Charge 18% GST on rent collected
• Issue a GST tax invoice to the tenant
• Report in GSTR-1 and pay GST in GSTR-3B

The tenant (if GST registered) can claim ITC on the GST paid on commercial rent. This is the standard scenario for most commercial property rentals in Kerala's business districts.

Unregistered Landlord Renting to Registered Tenant — RCM

If an unregistered landlord rents commercial property to a registered business (GST registered tenant), the tenant must pay GST under Reverse Charge Mechanism (RCM) at 18%. The tenant self-assesses and pays the GST, and can claim ITC on it. This applies to: small landlords not required to register for GST, HUFs renting commercial property, and individuals renting commercial space who are below GST threshold.

Residential Property — GST Position Post-2022 Amendment

The July 2022 GST Council recommendation significantly changed the position on residential rentals:

• Individual renting to another individual for residential use: Nil GST — no change
• Company/LLP/registered person taking a residential property on rent: If the property is used for the business (e.g., as a staff accommodation, director's residence paid by company), RCM applies — the registered business (tenant company) pays 18% GST under RCM. This was a significant change from July 2022.
• Individual renting residential property to a company for residential use of employees: The company (registered person) must pay 18% GST under RCM on the rent paid to the individual landlord.

The 2024 budget brought a further clarification — company-leased residential accommodation used exclusively as a residence for employees continues to attract RCM.

Co-Working and Serviced Office Spaces

Co-working spaces (like WeWork, Regus, local co-working spaces in Calicut) charge GST at 18% on the entire package (space + amenities). The tenant can claim ITC on this if the space is used for business. This is treated as supply of services (not rental of immovable property) — SAC code 997212.

Conclusion

GST on rental income requires careful categorisation — the type of property, the registration status of landlord and tenant, and the end use of the property all affect the GST treatment. SPOTON provides GST advisory on rental transactions, RCM compliance and ITC optimisation for Kerala businesses and landlords. Contact us for expert GST guidance.