When a business rents commercial property, office space, or a coworking desk in India, GST is usually applicable. But the rules around who pays the tax, which SAC code to use, and whether you can claim Input Tax Credit (ITC) can be confusing.
If you are a landlord leasing out commercial space or a business owner paying rent, here is the complete breakdown of the GST rules on office rent.
What is the SAC Code for Office Rent?
The correct Services Accounting Code (SAC) for renting or leasing out commercial, industrial, or office property is 997212.
The official CBIC description for SAC 997212 is: "Rental or leasing services involving own or leased non-residential property."
Key Details for SAC 997212
- Applicable GST Rate: 18%
- IGST: 18% (for inter-state transactions)
- CGST + SGST: 9% + 9% (for intra-state transactions)
- RCM Applicability: Yes, under specific conditions (explained below).
- ITC Eligibility: Yes, provided the rented premises are used for business purposes.
👉 Need to find another SAC code? Use our free SAC Code Finder to instantly search through 100+ GST service codes, rates, and rules.
When is GST Applicable on Rent?
GST on rent depends on two main factors: the type of property (commercial vs. residential) and the GST registration status of the landlord and the tenant.
1. Renting Commercial Property (Office Space)
Renting out an immovable property for business or commercial use is treated as a "Supply of Service" under GST law.
- GST Rate: 18%
- Threshold: The landlord must charge GST if their total annual rental income (plus any other business turnover) exceeds ₹20 Lakhs (₹10 Lakhs in special category states).
If the landlord's turnover is below ₹20 Lakhs and they are not GST registered, they do not need to charge GST on the rent invoice. However, the tenant might have to pay GST under RCM (Reverse Charge Mechanism).
2. Renting Residential Property for Business Use
This rule saw a major change recently. If a registered business rents a residential property to use as an office or guest house, GST at 18% is applicable under RCM. The tenant (the business) must pay the GST directly to the government, not to the landlord.
If a residential property is rented to an unregistered individual for personal use as a residence, it is completely exempt from GST.
The Reverse Charge Mechanism (RCM) on Rent
Normally under Forward Charge, the supplier (landlord) charges GST on the invoice, collects it from the recipient (tenant), and pays it to the government.
Under Reverse Charge Mechanism (RCM), the recipient (tenant) is responsible for depositing the GST directly to the government.
When does RCM apply to rent?
- Unregistered Landlord, Registered Tenant (Commercial): If a GST-registered business rents a commercial office from a landlord who is not registered for GST, the landlord cannot charge GST on their invoice. In this scenario, the registered tenant may be liable to pay 18% GST under RCM. (Note: The government occasionally tweaks the exemptions around purchases from unregistered persons, so always verify the current notification status with your CA).
- Residential Property for Business Use: As mentioned above, renting a residential dwelling by a registered person for business use always falls under RCM. The tenant pays the 18% GST.
- Government Property: If you rent property from the Central Government, State Government, or a Local Authority, the registered business entity paying the rent is liable to pay 18% GST under RCM.
Can You Claim Input Tax Credit (ITC) on Office Rent?
Yes! Office rent is a valid business expense. If you are a GST-registered business paying 18% GST on your commercial office rent, you can claim it as an Input Tax Credit (ITC) to offset your outward GST liability.
Conditions for claiming ITC on rent:
- The property must be used exclusively for business or professional purposes.
- You must have a valid tax invoice from the landlord (or a self-invoice if you paid under RCM).
- The landlord must have filed their GSTR-1, and the invoice must reflect in your GSTR-2B.
- You must have actually paid the rent and the GST amount to the landlord within 180 days.
Important exception: You generally cannot claim ITC if you are operating under the Composition Scheme.
How to Invoice for Office Rent (For Landlords)
If you are a GST-registered landlord billing a tenant for office rent, your invoice must clearly show:
- Your GSTIN and the Tenant's GSTIN (if they are registered).
- The SAC Code: 997212.
- The Base Rent amount.
- The GST split (CGST + SGST if you are in the same state, or IGST if the tenant is billed in a different state).
Example Invoice Calculation:
- Base Office Rent: ₹50,000
- Add: CGST @ 9%: ₹4,500
- Add: SGST @ 9%: ₹4,500
- Total Invoice Amount: ₹59,000
Need to generate a rent invoice? Use our free GST Invoice Generator to create a compliant PDF in minutes.
Late Payment of GST on Rent
If a landlord collects GST from a tenant but fails to deposit it with the government by the due date (usually the 20th of the following month via GSTR-3B), two penalties apply:
- Interest: 18% per annum on the unpaid tax amount for the period of delay.
- Late Fee: ₹50 per day for late filing of GSTR-3B.
You can calculate exact penalties using our GST Interest & Late Fee Calculator.
Disclaimer: GST rules and exemptions are subject to frequent changes by the GST Council. While we strive to keep this information accurate, always consult a qualified Chartered Accountant for advice specific to your business.