Last updated: 27 April 2026. Renting of immovable property is an ordinary commercial expense, but the GST treatment depends on three things: whether the property is residential or commercial, whether the landlord is registered, and whether the tenant is registered. Two entries in the RCM notification (5AA for residential dwelling and 5AB for commercial) move GST liability from the landlord to the tenant in specific scenarios. A registered business paying rent in 2026 may already owe GST under reverse charge without a bill.
Applicability Note: This guide is based on Notification No. 13/2017-Central Tax (Rate) as amended through Notification 05/2022-CTR (Entry 5AA), Notification 09/2024-CTR (Entry 5AB), and Notification 07/2025-CTR (composition exclusion), all read with the related CBIC clarifications. The position stated is as of 27 April 2026. Always verify the current entries on cbic-gst.gov.in or with a GST professional before acting.
Who Should Care?
This guide applies to:
- Registered businesses paying rent for offices, shops, godowns, factories, or co-working spaces
- Companies that lease or sub-lease residential apartments for staff accommodation, guest houses, or directors
- Composition dealers paying commercial rent to unregistered landlords (the rules changed in January 2025)
- Landlords who own commercial property and let it to GST-registered tenants without themselves being registered
1. The Two RCM Entries That Cover Rent
Two entries in the RCM notification deal with renting of immovable property. They were added at different times, target different scenarios, and have different conditions.
| Entry | Property Type | Trigger | Effective From |
|---|---|---|---|
| 5AA | Residential dwelling | Rented by any person to a registered person | 18 July 2022 (Notification 05/2022-CTR) |
| 5AB | Any immovable property other than residential dwelling | Rented by an unregistered person to a registered person (excluding composition taxpayers, since 16 January 2025) | 10 October 2024 (Notification 09/2024-CTR) |
The two entries do not overlap. A residential dwelling falls only within 5AA; anything else (shop, office, factory, godown, leased land) falls only within 5AB. The rate under both is 18%, and the place of supply for renting of immovable property is the location of the property under Section 12(3) of the IGST Act.
2. Residential Dwelling — Entry 5AA
The longstanding exemption under Entry 12 of Notification 12/2017-Central Tax (Rate) covered renting of a residential dwelling for use as a residence. That exemption is still in force, but its scope was narrowed on 18 July 2022. Entry 5AA was added through Notification 05/2022-CTR with one short trigger: if the residential dwelling is rented to a person registered under GST, the registered tenant pays 18% on the rent under reverse charge.
What 5AA actually covers
Three points are easy to miss. It applies regardless of whether the landlord is registered — a registered landlord renting a flat to a registered company is still inside 5AA. It applies regardless of whether the tenant uses the dwelling residentially or commercially; the test is the registration status of the tenant, not the use. It does not touch residential dwellings rented to unregistered persons for residential use — that transaction stays exempt under Entry 12 with no GST at either end.
The personal-use carveout
The Delhi High Court in Seema Gupta v. Union of India (27 September 2022) held that a proprietor renting a residential dwelling in personal capacity for own residence, on personal account and not in the course or furtherance of the proprietorship firm's business, was outside the RCM scope. Notification 15/2022-Central Tax (Rate) dated 30 December 2022 (effective 1 January 2023) amended Entry 5AA to give effect to this position. The carveout now sits inside the entry: 5AA does not apply where the registered person is the proprietor of a proprietorship concern who rents the dwelling in personal capacity for own residence on personal account. The lease must be in the proprietor's individual name, the rent invoice cannot show the firm's GSTIN, and the rent cannot be claimed as a business expense.
Where the dwelling is rented for staff accommodation in the course of business, ITC on the RCM tax may be available subject to fulfilment of all conditions under Section 16. The position is unsettled, though. Section 17(5)(g) of the CGST Act blocks ITC on goods or services used for personal consumption, and advance rulings have split on whether staff residential accommodation is a perquisite supplied in the course of business or personal consumption. Evaluate the facts of your case before claiming.
3. Commercial Property — Entry 5AB
Until October 2024, commercial rent followed a clean rule. If the landlord was registered, the landlord charged 18% GST on the invoice. If the landlord was unregistered (typically because their aggregate turnover stayed below ₹20 lakh, or ₹10 lakh in special category states), no GST was payable at either end. Section 9(4) of the CGST Act, which empowers the government to notify RCM on purchases from unregistered suppliers, had been dormant for most categories.
The 54th GST Council meeting on 9 September 2024 recommended pulling commercial rent from unregistered landlords into the RCM net to plug what the Council described as a leakage. The recommendation became Notification 09/2024-Central Tax (Rate) dated 8 October 2024, which inserted Entry 5AB into the RCM notification with effect from 10 October 2024. A corrigendum issued on 22 October 2024 clarified that the words "any property" should read "any immovable property", which scoped 5AB to land and building only.
Who 5AB applies to
Both the trigger conditions need to be satisfied at the same time:
- The landlord must be unregistered under GST
- The tenant must be registered under GST
If either side is the opposite, 5AB does not apply. A registered landlord still charges forward GST. An unregistered tenant has no RCM liability because they cannot pay tax in the first place.
The composition carveout (16 January 2025)
Notification 07/2025-Central Tax (Rate) dated 16 January 2025 inserted the words "other than a person who has opted to pay tax under composition levy" into Entry 5AB. The change took effect from the same date and was issued on the recommendation of the 55th GST Council. From 16 January 2025 onwards, a composition dealer paying commercial rent to an unregistered landlord is outside RCM. The transactions between 10 October 2024 and 15 January 2025 were regularised by the same notification, so composition dealers who never paid the RCM tax during that window will not face a demand for that period.
Three details about this carveout. (i) It applies only to Entry 5AB. A composition dealer renting a residential dwelling for business premise is still inside Entry 5AA, which has no composition exclusion. And because the composition scheme bars ITC outright, the 18% RCM under 5AA sits as a pure cost. (ii) The carveout does not flip the transaction back to the landlord; if the landlord stays unregistered, no GST is collected at all. (iii) The Oct 2024 to Jan 2025 regularisation is as-is-where-is — composition dealers who did pay RCM during that window cannot claim a refund.
4. When Forward Charge Still Applies
RCM is the exception. Most rent transactions still follow forward charge: the registered landlord charges 18% on the invoice and remits it. The ₹20 lakh aggregate turnover threshold (₹10 lakh for special category states like Manipur, Mizoram, Nagaland, Tripura) decides whether a landlord must register. A landlord earning ₹24 lakh a year from one commercial property is liable to register; if they do not, the registered tenant carries the RCM under Entry 5AB. A residential dwelling rented to an unregistered person for use as a residence stays exempt under Entry 12 of Notification 12/2017-CTR.
5. Practical Scenarios
| Scenario | Who Pays GST | Mechanism |
|---|---|---|
| Registered company rents office from registered landlord | Landlord charges, tenant claims ITC | Forward charge, 18% |
| Registered company rents office from unregistered landlord (turnover < ₹20L) | Tenant pays under RCM | Entry 5AB, 18%, ITC available |
| Composition dealer rents shop from unregistered landlord | No GST payable (since 16 Jan 2025) | Excluded from 5AB by Notification 07/2025 |
| Registered company rents residential flat for staff accommodation | Tenant pays under RCM | Entry 5AA, 18%, ITC subject to Section 16 conditions |
| Proprietor of registered firm rents flat for personal residence | Exempt | Entry 12 exemption, codified by Notification 15/2022-CTR |
6. ITC, Self-Invoicing and Time of Supply
RCM tax has to be paid in cash through the electronic cash ledger; existing ITC balance cannot be used. After cash payment, the same amount is claimed as ITC in the same GSTR-3B, subject to fulfilment of all conditions under Section 16. Net cash impact is usually zero.
For purchases from unregistered suppliers, Rule 47A of the CGST Rules (in force from 1 November 2024) gives the recipient 30 days from receipt of the supply to issue the self-invoice. Late self-invoicing complicates the ITC claim because the invoice date drives the Section 16(4) time limit. For monthly rent under Entry 5AB, raising the self-invoice on the rent due date is the cleanest practice.
Time of supply rules differ by supplier registration. Section 13(3) of the CGST Act, as amended by the Finance (No. 2) Act 2024 with effect from 1 November 2024, sets the time of supply for RCM services from an unregistered person as the earlier of (a) date of payment or (b) date the recipient issues the self-invoice under Rule 47A. The 60-day-from-supplier-invoice limb survives only for RCM services from registered suppliers. For Entry 5AB rent from an unregistered landlord, the date you raise the self-invoice now directly drives the time of supply.
Key Takeaways
- Entry 5AA shifts GST on residential dwellings to a registered tenant since 18 July 2022, regardless of the landlord's status. Notification 15/2022-CTR (effective 1 January 2023) carved out proprietors renting in personal capacity, codifying the Delhi HC ruling in Seema Gupta.
- Entry 5AB, effective 10 October 2024, pulls commercial rent from unregistered landlords to registered tenants into RCM at 18%. The 22 October 2024 corrigendum scoped it to immovable property only.
- Composition dealers were carved out of 5AB from 16 January 2025 (Notification 07/2025-CTR). The Oct 2024 to Jan 2025 window is regularised on an as-is-where-is basis — no demand for non-payers, no refund for those who paid.
- Self-invoice within 30 days under Rule 47A. After the Finance (No. 2) Act 2024 amendment, time of supply for unregistered RCM is earlier of date of payment or date of self-invoice.
Frequently Asked Questions
Does RCM on commercial rent apply if the landlord is registered?
No. Entry 5AB is triggered only when the landlord is unregistered and the tenant is registered. If the landlord is registered, they charge 18% GST on the rent invoice under forward charge and the tenant claims ITC normally, subject to fulfilment of Section 16 conditions.
I rent a residential flat for my employees' stay. Do I owe GST under RCM?
If your business is registered, yes — Entry 5AA covers renting of residential dwelling to a registered person at 18% RCM, regardless of the landlord's status. ITC may be available subject to Section 16, but Section 17(5)(g) and conflicting advance rulings on staff accommodation as a perquisite vs personal consumption mean the position should be evaluated on facts.
I am a composition dealer paying ₹50,000 per month rent for my shop to an unregistered landlord. Do I pay RCM?
Not as of 27 April 2026. Notification 07/2025-Central Tax (Rate) dated 16 January 2025 excluded composition taxpayers from Entry 5AB with effect from the same date. The October 2024 to January 2025 period has been regularised. If your landlord later registers, they will charge forward GST and the position changes.
Disclaimer: This article is for informational purposes only and does not constitute professional tax advice. GST rules are subject to frequent changes through notifications and circulars. Please consult a qualified tax professional or verify the current provisions on the official GST portal (gst.gov.in) before making any compliance decisions.
Have a specific question about RCM on rent or your lease structure? Our GST experts can help → gstconsultancy.com