The tenant's registration status and the landlord's registration status are threshold classification facts
At a glance
Classify the property as commercial/non-residential for the entry.
Applying the commercial-rent RCM entry to residential dwelling without checking the separate rules.
Lease deed and property-use classification
Rules
| Control |
|---|
| The tenant's registration status and the landlord's registration status are threshold classification facts |
| Subsequent relief/clarification for specified composition taxpayers and past periods must be checked before applying the rule mechanically |
| From 10 October 2024, notified reverse-charge treatment applies to specified commercial-property renting by an unregistered person to a registered person |
| RCM liability, input credit and lease reimbursement clauses should be reviewed together |
Commercial rent RCM turns on the landlord/tenant GST status and the effective date
From 10 October 2024, Notification 09/2024-CT(Rate) brought renting of immovable property other than residential dwelling by an unregistered person to a registered person into reverse charge through entry 5AB. That means the registered tenant—not the unregistered landlord—can become liable to pay GST on the commercial rent under RCM.
The rule was then refined for composition taxpayers. CBIC’s clarification records that the 55th GST Council recommended excluding composition-levy taxpayers from entry 5AB, implemented through Notification 07/2025-CT(Rate) from 16 January 2025, with separate regularisation for the intervening period. A compliance memo should therefore use the invoice/rent period and tenant type, not just today’s rule.
RCM does not turn the landlord into a normal GST supplier for that transaction. The tenant accounts for tax, reports the liability and then separately tests input-tax-credit eligibility. ITC can be blocked or restricted depending on the tenant’s business use and section 17 conditions; paying RCM does not guarantee credit.
Lease structures can contain maintenance, fit-out recovery, electricity reimbursement or common-area charges. Each component should be classified under the contract instead of blindly applying the rent entry to every amount. The landlord’s registration status should also be rechecked during the lease because a later registration can change the charging mechanism.
| Situation | How to handle it |
|---|---|
| Unregistered landlord, regular registered tenant, commercial office rent after 10 Oct 2024 | Entry 5AB can place GST liability on the tenant under RCM. |
| Unregistered landlord, composition taxpayer tenant after 16 Jan 2025 | Check the notified composition exclusion and period-specific relief before paying RCM. |
| Landlord later obtains GST registration | Re-test forward-charge/RCM treatment from the relevant change date and amend the vendor master. |
Worked example 1
Assume a registered business pays ₹1,00,000 monthly commercial rent to an unregistered landlord and the notified reverse-charge entry applies. At an 18% service rate, the recipient computes ₹18,000 GST under RCM, subject to the exact notification and eligibility. Answer: ₹1,00,000 × 18% = ₹18,000 RCM tax. Before creating a recurring RCM journal, examine whether the recipient falls within an exclusion or subsequent relief and whether the landlord is in premise unregistered for the period. Finding: Validate supplier standing, recipient situation and effective period each period.
Worked example 2
A regular GST-registered consultancy rents an office from an individual landlord who is not registered. Monthly rent is ₹1 lakh from November 2024. The tenant should account for GST under the applicable RCM entry, discharge the liability, and then test ITC based on business use and section 17 restrictions. If the tenant had been under composition levy during the transition, it would need to apply the later exclusion/regularisation rules by date rather than copying the regular-taxpayer treatment.
Mistakes
- Applying the commercial-rent RCM entry to residential dwelling without checking the separate rules.
- Ignoring the 10 October 2024 effective date and the 16 January 2025 composition-taxpayer change.
- Assuming RCM payment automatically gives full ITC.
- Failing to revisit treatment when the landlord becomes registered.
Action steps
- Classify the property as commercial/non-residential for the entry.
- Confirm landlord and tenant GST status for each period.
- Apply the correct effective-date/transition rule.
- Discharge RCM where applicable and report it correctly.
- Test ITC separately under normal credit restrictions.
- Reassess the mechanism if either party’s registration status changes.
Documents
- Lease deed and property-use classification
- Landlord GST-registration status evidence
- RCM tax payment/return working by month
- ITC eligibility memo and composition-status evidence where relevant
FAQs
When did commercial rent from an unregistered landlord move to RCM for a registered tenant?
The notified entry took effect from 10 October 2024.
Are composition taxpayers treated the same way?
No. A later notification excluded specified composition taxpayers from the entry from 16 January 2025, with transition regularisation addressed separately.
Does the landlord charge GST on the invoice under this RCM entry?
Where the RCM conditions apply, the registered tenant accounts for the tax rather than the unregistered landlord charging forward tax.
Can the tenant claim ITC of RCM paid?
Only if the normal ITC conditions are satisfied and no blocking/restriction applies to the business use.
Sources
- Commercial Property Rent Under RCM: GST Council FAQs on decisions
- Commercial Property Rent Under RCM: CBIC Central Tax (Rate) notifications
- CBIC — 55th GST Council services clarification
Educational reference. Verify current official sources and facts.