GST on commercial rent is 18%. If your landlord is GST registered, they charge it on the rent invoice. If the landlord is not registered but you, the business tenant, are, you pay the 18% yourself under the reverse charge mechanism (RCM), a rule in force since 10 October 2024, unless you are a composition taxpayer. Property tax is a separate local tax on the owner, and many tenants also need to deduct TDS on the rent they pay.
Key takeaways
- Renting commercial property is taxed at 18%; the September 2025 GST rate changes did not alter this.
- From 10 October 2024, a registered tenant pays GST under RCM when the landlord is unregistered; composition taxpayers were excluded from 16 January 2025.
- Registered tenants using the premises for business can usually claim input tax credit on this GST.
- Property tax is payable by the owner to the local body, such as Coimbatore City Municipal Corporation, and is separate from GST.
Who pays GST on commercial rent?
| Landlord | Tenant | GST treatment |
|---|---|---|
| Registered | Registered or unregistered | Landlord charges 18% on the invoice (forward charge) |
| Unregistered | Registered (regular scheme) | Tenant pays 18% under reverse charge |
| Unregistered | Registered under composition | Excluded from this reverse charge from 16 January 2025 |
| Unregistered | Unregistered | No GST |
The reverse charge entry was introduced by Notification No. 09/2024-Central Tax (Rate), effective 10 October 2024, to cover renting of immovable property other than residential dwellings by an unregistered person to a registered person. On the GST Council’s recommendation at its 55th meeting in December 2024, composition taxpayers were taken out of it by Notification No. 07/2025-Central Tax (Rate) from 16 January 2025, with the earlier period regularised on an “as is where is” basis.
What about residential property used as an office?
Renting a residential dwelling to a GST-registered person has been under reverse charge since 18 July 2022. From 1 January 2023, a registered proprietor renting a home for personal residence, not on account of the business, is exempt. If a home is used as an office, speak to your chartered accountant about how it is classified.
When must a landlord register for GST?
A landlord must register once aggregate turnover of taxable supplies crosses the threshold for service providers, which is ₹20 lakh in a year for most states including Tamil Nadu. Turnover is counted across all the landlord’s taxable supplies, not per property. Rent from residential property let for residence is generally exempt, which affects the calculation. Landlords near the threshold should take professional advice, because the reverse charge rules mean many tenants will ask about registration status.
Input tax credit for tenants
A registered tenant using the premises for taxable business can usually claim credit for GST paid on rent, whether charged by the landlord or paid under RCM. Under RCM, you pay the tax in cash in your return and then claim it as credit in the same period, provided conditions are met. The cost is neutral for fully taxable businesses but real for exempt businesses or unregistered tenants.
What is included in the value?
- Rent and maintenance: GST applies to rent and to maintenance or amenity charges billed by the landlord.
- Security deposit: a genuinely refundable deposit is generally not treated as consideration, but amounts adjusted against rent or forfeited can be.
- Reimbursements: property tax or other charges recovered from the tenant can form part of the taxable value depending on how the lease is worded. Ask your CA before you finalise the clause.
TDS on rent
Businesses paying rent may have to deduct TDS under the rules familiar as section 194-I of the Income-tax Act, 1961 (and section 194-IB for certain individuals and HUFs). The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026 and renumbered these provisions, so check the current section and threshold with your tax adviser. CBDT has clarified that where GST is shown separately in the agreement or invoice, TDS is calculated on the rent excluding GST.
Property tax on commercial buildings
Property tax is levied by the local body on the owner, based on the assessed value of the building, its use and location. Commercial use is taxed at higher rates than residential use in Tamil Nadu’s urban local bodies. In Coimbatore, the tax is assessed and collected by Coimbatore City Municipal Corporation, and can be paid online or at corporation offices. Points for businesses:
- Owners: make sure the assessment reflects commercial use; a residential assessment on a building used commercially can lead to revision with arrears.
- Tenants: ask for recent property tax receipts before signing. They are useful proof of ownership for your GST registration.
- Who pays: the lease should state clearly that property tax is the owner’s liability, or how any reimbursement will work.
Our guide to property tax in Coimbatore Corporation explains the assessment and payment process.
Practical checklist
- Ask the landlord for their GSTIN, or a written confirmation that they are unregistered.
- State in the lease whether rent is exclusive of GST and who bears GST if status changes.
- Set up RCM self-invoicing and payment if the landlord is unregistered.
- Deduct and deposit TDS where required.
- Collect property tax receipts for your GST file.
For the wider lease picture, see commercial lease clauses, or browse offices and workspaces in Coimbatore.
Frequently asked questions
What is the GST rate on commercial rent in 2026?
18%. The September 2025 GST rate rationalisation did not change the rate on renting commercial property.
Do I pay GST if my landlord is not registered?
If you are GST registered under the regular scheme and rent commercial property from an unregistered landlord, you pay 18% GST under reverse charge. Composition taxpayers are excluded.
Is GST charged on property tax?
Property tax is a local levy on the owner and does not itself attract GST. If a lease makes the tenant reimburse it, the amount may form part of the value of the rent supply, so ask your chartered accountant.
Is TDS deducted on the GST part of rent?
Where GST is shown separately, CBDT has clarified that TDS is calculated on the rent excluding GST.
This article is general information as of September 2026, not legal, tax or financial advice. Rules and rates change; confirm with a qualified advocate, chartered accountant or the relevant department before you act.
References
- GST Council 55th meeting press release (CBIC)
- RCM on renting of immovable property: notifications and dates (Kishore Kamal & Co.)
- GST rate on rental income after September 2025 (TaxTMI forum)
- GST on renting of immovable property: notes (HNA LLP)
Renting commercial space in Coimbatore?
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