Renting immovable property for commercial use is a taxable supply. In the ordinary case the landlord charges GST and you claim the credit, and nothing about it requires thought. The complication is what happens when the landlord is not registered — because the liability does not disappear, it moves to the tenant under reverse charge.
Who pays, in each case
| Property | Landlord | Who pays GST |
|---|---|---|
| Commercial | Registered | Landlord, on the invoice (forward charge) |
| Commercial | Unregistered | The registered tenant, under reverse charge |
| Residential dwelling | Any | The registered tenant, under reverse charge |
| Residential dwelling | Any | No GST if the tenant is unregistered and it is genuinely a dwelling |
The second row is the one that changed and the one that catches people. A small business renting a shop or office from an individual owner who has no GST registration is now the person responsible for the tax on that rent.
What reverse charge actually means for cash flow
Under reverse charge you pay the tax to the government in cash — it cannot be settled from your input tax credit balance. You then claim that same amount back as credit in the same or a following period, subject to the usual conditions. So the net cost is nil for a business making taxable supplies, but the timing cost is real, and the compliance step is mandatory whether or not you end up with credit.
If you are on the composition scheme, the position is worse: you pay the reverse charge at the normal rate and get no credit at all, because composition dealers cannot claim ITC.
Self-invoicing is required for supplies received from unregistered persons under reverse charge. It is the step most commonly skipped, and its absence is what turns a clean position into a disputed one during audit.
The credit side
Rent on premises used for business is normally eligible for input tax credit, which is why the forward-charge case is usually neutral. Watch two restrictions: credit is not available to the extent the premises are used for exempt supplies or for personal use, and works-contract or construction-related restrictions can apply if the arrangement is really about construction rather than occupation.
The mechanics of claiming and matching sit in our input tax credit guide.
Practical steps for a tenant
- Ask your landlord for their GSTIN in writing. If there is not one, assume reverse charge applies and budget for it.
- Raise a self-invoice for each month of rent from an unregistered landlord.
- Pay the reverse-charge liability in cash through the return, and claim the corresponding credit.
- Keep the rent agreement — our commercial rent agreement template sets out the clauses that make the GST position explicit between the parties.
- If you have missed several months, quantify the arrear before it is found for you. Interest runs from the original due date.
Where we come in
Reverse charge on rent, transport and legal fees is the group of items we check first on any new GST engagement, because it is where quiet arrears accumulate. If a notice has already been issued on it, our notice handling service takes the reply.
This article is general information, not professional advice. Limits, rates and dates change by notification — confirm the position for your own year before acting on it.