GST ON RENTING OF COMMERCIAL PROPERTY BY UNREGISTERED LANDLORD — RCM 2026

📌 INTRODUCTION

GST on commercial property rent has an important Reverse Charge Mechanism (RCM) provision that businesses need to understand, especially where the landlord is not registered under GST.

From 10 October 2024, renting of immovable property other than a residential dwelling by an unregistered person to a registered person was brought under RCM through Notification No. 09/2024-Central Tax (Rate). The rule was subsequently amended to exclude taxpayers who are registered under the composition levy scheme. :contentReference[oaicite:0]{index=0}

This means that in a normal case, when a GST-registered business takes a commercial property on rent from an unregistered landlord, the tenant becomes responsible for paying GST under RCM.

🏢 WHEN IS RCM APPLICABLE ON COMMERCIAL RENT?

The basic rule can be understood through three conditions:

🏠 Property → Immovable property other than a residential dwelling

👤 Landlord → Unregistered under GST

🏢 Tenant → Registered under GST and not under the composition levy scheme

When all these conditions are satisfied, GST is payable by the registered tenant under RCM.

The original notification used the wording “any property other than residential dwelling”. A subsequent corrigendum clarified that the provision refers to “immovable property”. :contentReference[oaicite:1]{index=1}

For example, if a registered company takes an office, shop, warehouse or commercial premises on rent from an unregistered landlord, the company generally has to discharge GST under RCM.

💰 WHAT IS THE GST RATE ON COMMERCIAL RENT?

Renting and leasing services covered under the relevant service classification are generally taxable at 18% GST.

Therefore, where commercial rent is taxable under RCM, the registered tenant generally pays GST at 18% on the applicable taxable value.

For an intra-State transaction, the liability will generally be:

CGST → 9%

SGST → 9%

For an inter-State transaction, IGST at 18% may apply, subject to the applicable place-of-supply provisions.

The CBIC rate schedule shows 18% for the relevant real estate and rental/leasing services. :contentReference[oaicite:2]{index=2}

🧾 WHO HAS TO PAY THE GST?

Under RCM, the landlord does not collect GST from the tenant.

Instead, the registered tenant becomes responsible for paying the GST directly to the Government.

For example:

Monthly Commercial Rent = ₹1,00,000

GST @ 18% = ₹18,000

Total economic outflow = ₹1,18,000

The ₹18,000 GST is discharged by the tenant under RCM rather than being charged by the unregistered landlord.

📄 DOES THE UNREGISTERED LANDLORD ISSUE A GST INVOICE?

No.

An unregistered landlord cannot issue a GST tax invoice charging GST.

Where the recipient is required to pay GST under RCM for a supply received from an unregistered supplier, the registered recipient is required to issue the applicable self-invoice/document and discharge the GST liability.

CBIC’s guidance specifically states that a registered recipient receiving a notified RCM supply from an unregistered supplier has to issue an invoice on self and pay GST under RCM. :contentReference[oaicite:3]{index=3}

Therefore, the rent agreement and landlord’s rent receipt may continue to support the underlying rental payment, but the GST liability under RCM is separately accounted for by the registered tenant.

📊 CAN THE TENANT CLAIM INPUT TAX CREDIT?

Generally, GST paid under RCM can qualify as input tax where the normal ITC conditions are satisfied.

Therefore, a registered business using the commercial property for taxable business activities may generally claim the GST paid under RCM as ITC, subject to Section 16 and other applicable conditions.

For example:

Commercial Rent = ₹1,00,000

RCM GST @ 18% = ₹18,000

GST paid under RCM = ₹18,000

Eligible ITC = ₹18,000, subject to applicable ITC conditions.

However, payment of RCM GST and eligibility to claim ITC are two separate compliance questions. A taxpayer should first discharge the RCM liability and then determine whether the credit is available.

🔄 WHAT CHANGED FOR COMPOSITION TAXPAYERS?

An important amendment was made after the original 2024 introduction of this RCM provision.

The 55th GST Council recommended excluding taxpayers registered under the composition levy from the commercial-property RCM entry. This recommendation was implemented through Notification No. 07/2025-Central Tax (Rate) dated 16 January 2025. :contentReference[oaicite:4]{index=4}

Therefore, for the current position in 2026, the commercial-property RCM entry does not apply where the registered recipient is a person who has opted for the composition levy.

This distinction is important because an article based only on the original October 2024 notification would give an outdated position.

🏠 WHAT IF THE LANDLORD AND TENANT ARE BOTH UNREGISTERED?

If an unregistered landlord rents commercial property to an unregistered person, this specific RCM provision does not make the transaction taxable merely because commercial rent is being paid.

The specific entry applies where an unregistered supplier provides the relevant renting service to a registered recipient.

However, other GST registration and taxability provisions should still be evaluated based on the landlord’s overall activities and circumstances.

🏢 WHAT IF THE LANDLORD IS GST REGISTERED?

If the landlord is registered under GST, the normal forward-charge mechanism generally applies to taxable commercial renting services.

In that situation:

👤 Landlord → Charges GST

🏢 Tenant → Pays rent plus GST

📄 Landlord → Issues GST tax invoice

💰 Landlord → Reports and pays GST

The tenant may claim eligible ITC subject to the normal GST provisions.

Therefore, the RCM rule discussed in this article is specifically relevant to the situation where the landlord is unregistered and the recipient is a registered person who is not under the composition scheme.

⏳ TIME OF SUPPLY UNDER RCM

Time of supply determines when the tenant becomes liable to pay GST.

For services covered under RCM, the general rule considers the earlier of:

💳 Date of payment as recorded in the books or the date of debit in the bank account, whichever is earlier.

📄 The date immediately following 60 days from the date of issue of the invoice by the supplier.

CBIC’s RCM guidance confirms the 60-day rule for services. :contentReference[oaicite:5]{index=5}

Since the landlord is unregistered and may not issue a GST invoice, the tenant should maintain proper rental documentation and apply the applicable RCM provisions carefully.

📑 DOCUMENTS TO MAINTAIN

Businesses paying commercial rent under RCM should maintain proper records such as:

📄 Rent or lease agreement

🧾 Rent receipt issued by the landlord

🏦 Bank/payment proof

🧾 Self-invoice or applicable RCM document

📊 RCM calculation working

📋 GST return records

📑 ITC records, wherever credit is eligible

Maintaining these documents helps establish the nature and value of the rental service and supports both the RCM payment and any eligible ITC claim.

⚠️ COMMON MISTAKES TO AVOID

Businesses often make the following mistakes:

🚫 Assuming that an unregistered landlord means no GST is payable.

🚫 Ignoring the RCM provision for commercial property rent.

🚫 Applying the rule to residential property without checking the separate provisions applicable to residential dwellings.

🚫 Forgetting that composition taxpayers were subsequently excluded from this specific commercial-property RCM entry.

🚫 Claiming ITC without checking the normal ITC conditions.

🚫 Not maintaining proper rent agreements and RCM documentation.

🚫 Paying RCM GST in the wrong tax period.

💡 PRACTICAL EXAMPLE

Suppose ABC Private Limited is GST registered and takes an office on rent from an individual landlord who is not registered under GST.

Monthly rent = ₹2,00,000

The property is a commercial office.

The tenant is a regular GST taxpayer and is not under the composition scheme.

In this case:

🏢 Landlord → Unregistered

🏠 Property → Commercial immovable property

🏢 Tenant → Registered regular taxpayer

💰 Rent → ₹2,00,000

📊 GST @ 18% → ₹36,000

The company would generally discharge ₹36,000 GST under RCM.

If the company satisfies the applicable ITC conditions and uses the premises for eligible business activities, it may claim the RCM tax as ITC.

🏁 CONCLUSION

The GST treatment of commercial property rent from an unregistered landlord is an important compliance area for businesses in 2026.

Where an unregistered person rents immovable commercial property to a registered person who is not under the composition levy, GST is generally payable by the registered tenant under RCM. The applicable rate is generally 18%, and eligible tenants may claim ITC subject to the normal conditions.

Businesses should also remember that the position was introduced from 10 October 2024 and subsequently modified for composition taxpayers from January 2025. Therefore, the current 2026 position should be checked rather than relying on older articles explaining only the original 2024 rule. :contentReference[oaicite:6]{index=6}

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