GST on Rent Under RCM — At a Glance
If you rent a commercial property from an unregistered landlord, you (the registered tenant) must pay 18% GST directly to the government under RCM — the landlord charges nothing.
This rule applies from 10 October 2024 under Notification No. 09/2024-Central Tax (Rate).
A separate RCM rule has applied to residential dwellings rented to a GST-registered person since 18 July 2022 under Notification No. 05/2022-Central Tax (Rate).
RCM on rent applies only when the tenant is already a registered person — unregistered tenants are outside these two entries.
Tax paid under RCM can generally be claimed back as Input Tax Credit (ITC) if the property is used for taxable business purposes.
Why Every Tenant Needs to Understand This Rule
Renting office space, a godown, a shop, or even a residential flat for business use sounds like a routine transaction — until GST enters the picture. For most goods and services, the supplier collects GST and deposits it with the government. Rent used to work exactly this way too. But GST law carves out specific situations where this default flips entirely: the person paying the rent becomes responsible for calculating, depositing, and reporting the tax, while the landlord collects nothing extra. This is the Reverse Charge Mechanism, or RCM, and it now covers a meaningful slice of rental transactions in India — most notably, commercial rent paid to unregistered landlords since October 2024, and residential dwellings rented to registered persons since July 2022.
Getting this wrong is not a minor slip. A tenant who fails to self-assess and pay RCM on rent can face interest, penalty, and denial of the very Input Tax Credit they were otherwise entitled to. This guide walks through exactly when RCM applies to rent, at what rate, how registration and compliance work, and how landlords and tenants should approach it in practice.
Applicable Provisions
05/2022-Central Tax (Rate), dated 13 July 2022
09/2024-Central Tax (Rate), dated 8 October 2024
As amended from time to time
Reverse Charge Mechanism, Explained Simply
Under Section 9(3) of the CGST Act, the government can notify specific categories of supply where the recipient of goods or services — not the supplier — is liable to pay GST. This is the Reverse Charge Mechanism. It exists mainly to plug revenue leakage in situations where the supplier is unregistered, hard to track, or otherwise unlikely to deposit tax on their own — an unregistered individual landlord being a textbook example.
Forward Charge vs Reverse Charge on Rent
GST Treatment of Rent — Commercial / Non-Residential Property
Landlord Status | Tenant Status | GST Treatment | Who Pays GST |
|---|---|---|---|
| Unregistered | Unregistered | No GST applicable | Nobody |
| Registered | Unregistered | Forward charge — landlord collects GST | Landlord |
| Registered | Registered | Forward charge — landlord collects GST | Landlord |
| Unregistered | Registered (regular) | Reverse charge under Notification 09/2024-CT(R) | Tenant (RCM) |
| Unregistered | Registered (composition) | Originally taxable under RCM; the 55th GST Council meeting (Dec 2024) recommended relief for composition taxpayers — verify current notified status before relying on this | Tenant (subject to verification) |
RCM on Commercial and Other Non-Residential Property
The most significant recent change came via Notification No. 09/2024-Central Tax (Rate), dated 8 October 2024, effective from 10 October 2024. It inserted entry 5AB into Notification No. 13/2017-Central Tax (Rate), bringing 'renting of any property other than residential dwelling' by an unregistered person to a registered person under RCM. A corrigendum dated 22 October 2024 clarified that 'any property' in this entry means 'any immovable property' — covering shops, offices, godowns, warehouses, and similar commercial spaces.
In practical terms: if you run a registered business and rent your office or shop from an individual landlord who is not GST-registered, you can no longer expect GST on the rent invoice at all. Instead, you must self-assess 18% GST on the rent, pay it to the government from your cash ledger, and — subject to the usual conditions — claim it back as ITC in the same return period.
Timing Matters
RCM on Residential Dwellings Rented to a Registered Person
Before October 2024, residential dwelling rent had already seen a similar shift. Notification No. 05/2022-Central Tax (Rate), dated 13 July 2022, effective from 18 July 2022, inserted entry 5AA, placing the renting of a residential dwelling to a registered person under RCM — a sharp change from the earlier position where renting a residential dwelling for use as a residence was wholly exempt from GST under Notification No. 12/2017-Central Tax (Rate).
This provision caused considerable confusion when it was first introduced, because on a literal reading it appeared to cover even a GST-registered individual renting a flat purely for personal living. The generally accepted clarification — reflected in subsequent guidance from tax authorities and professional bodies — is that RCM under this entry is meant to apply where the dwelling is taken for business purposes and the rent is reflected in the business's books, not where a registered proprietor or partner rents a home in a purely personal capacity unconnected to the business. Given how fact-sensitive this distinction can be, businesses renting residential premises for use as guest houses, employee accommodation, or registered offices should treat RCM as applicable unless they have a clear basis to conclude otherwise.
Where Landlords and Tenants Go Wrong
Professionals Beware
Tenants often assume that because the landlord isn't registered, there's simply no GST on the transaction. Under RCM, the tenant's own registration is what triggers the liability — the landlord's status decides who pays, not whether tax is payable.
Where tax is paid under RCM and the supplier is unregistered, the recipient must issue a self-invoice as required under Section 31(3)(f) of the CGST Act — this is frequently skipped, creating documentation gaps during audits.
RCM liability must be discharged only in cash through the electronic cash ledger — it cannot be set off using available ITC balance.
Delayed RCM payment attracts interest under Section 50 (calculate with our GST Interest Calculator) and can also delay the corresponding ITC claim, since credit is generally available only in the period the self-invoice is issued and tax is actually paid.
Once the landlord is GST-registered, forward charge applies as usual — treating this as RCM by mistake results in double payment of tax.
Office Rent from an Unregistered Landlord
Real-Life Scenario
Nova Consultants Pvt. Ltd., a GST-registered company, rents an office from Mr. Raghav, an individual landlord who is not registered under GST. Monthly rent is ₹1,00,000, payable from November 2026 onward.
Since Mr. Raghav is unregistered and Nova is a registered tenant renting non-residential space, entry 5AB (Notification 09/2024-CT(R)) applies.
GST @ 18% on ₹1,00,000 = ₹18,000 per month, payable by Nova directly to the government.
Nova issues a self-invoice for the rent, since Mr. Raghav cannot legally issue a tax invoice.
Nova pays ₹18,000 through the electronic cash ledger and reports it under the RCM liability table in GSTR-3B for that period.
Since the office is used for taxable business activity, Nova claims the ₹18,000 as ITC in the same or a subsequent return, subject to Section 16 conditions.
Where feasible, tenants can negotiate rent agreements that clearly state the landlord's GST registration status and require prompt notice of any change — this makes month-to-month RCM determination far easier.
Rate of Tax and Registration Requirements
Renting of immovable property falls under SAC 9972 (real estate services) and is taxed at a flat 18% GST, whether paid under forward charge or reverse charge — there is no concessional rate for rent. For landlords, ordinary GST registration rules and thresholds continue to apply under Section 22 of the CGST Act: an aggregate turnover exceeding ₹20 lakh (₹10 lakh in specified special category states) from taxable supplies, including rental income from commercial property, triggers a registration requirement.
RCM Doesn't Force the Landlord to Register
Key Compliance Timelines
RCM liability for a tax period is payable with GSTR-3B; late filing can incur penalties (see our GST Late Fee Calculator).
To be issued without delay when receiving rental service from an unregistered landlord, as required under Section 31(3)(f).
ITC on RCM rent is generally available in the tax period in which the tax is actually paid and the self-invoice is recorded.
Can the Tenant Claim ITC on RCM Rent?
Yes, in most cases. A registered tenant who pays GST under RCM on rent used for taxable business purposes can claim it as credit. Review our comprehensive guide on Input Tax Credit (ITC) rules and eligibility for Section 16 conditions — including possession of a valid self-invoice, proof of payment, use of the property for taxable outward supplies, and ensuring the credit is not restricted under Section 17(5). Composition taxpayers are the key exception: even where they are required to pay RCM, the composition scheme itself bars them from claiming any ITC, making the RCM payment a straight cost for such businesses.
Verify Before Relying on Composition Relief
Frequently Asked Questions
Key Takeaways
Rent has become one of the more RCM-heavy categories under GST, and the trigger is almost always the landlord's registration status rather than the amount of rent. Commercial and other non-residential rent paid to an unregistered landlord by a registered tenant has attracted RCM at 18% since 10 October 2024, under Notification No. 09/2024-Central Tax (Rate). Residential dwellings rented to a registered person for business-linked use have been under RCM since 18 July 2022, under Notification No. 05/2022-Central Tax (Rate). In both cases, the tenant self-invoices, pays in cash, and can generally claim the amount back as ITC if the property supports taxable business activity. Composition taxpayers remain the notable exception on the ITC side, and any relief for them from the RCM liability itself should be confirmed against the latest notification before being relied upon.
Legal Disclaimer
The information provided on this page is for general informational purposes only and does not constitute legal advice. Tax laws are subject to frequent amendments and judicial interpretations. Readers are advised to consult a qualified tax professional or legal counsel for specific guidance tailored to their situation.