Should businesses with rental properties in multiple states register in each state for ease of compliance of GST on rent?

 

GST on Rental Income from Immovable Property depends on Place of Supply Rules. Should businesses with rental properties in multiple states register in each state for ease of compliance?

The taxation of rental income under GST depends on the place of supply rules. As per Section 12(3) of the IGST Act, 2017, the place of supply for renting of immovable property is the location of the immovable property itself, irrespective of the supplier’s or recipient’s GST registration.

1-How GST is Charged on Rental of Immovable Property?
If the supplier (lessor) and recipient (lessee) are registered in the same state as the property location:
GST will be charged as CGST & SGST of that state.
The lessee can claim ITC if the property is used for business purposes.

2-If the supplier (lessor) is registered in a different state than the property location, and the lessee is registered in the same state as the property:
GST will be charged as IGST since it qualifies as an inter-state supply.
The lessee can claim ITC on IGST if eligible.

3-If both the supplier (lessor) and recipient (lessee) are registered in a different state than the property location:
GST will be charged as IGST, as the place of supply remains the location of the property.
The lessee may face challenges in availing ITC unless they have a GST registration in the state where the property is located.

4-If the supplier has obtained GST registration in the state where the property is located:
GST will be charged as CGST & SGST of that state.
The lessee can claim ITC under normal conditions if the property is used for business.

5-If invoices were mistakenly issued with CGST & SGST of a different state:
The supplier must issue a credit note to nullify the incorrect tax and reissue the invoice with the correct GST type (IGST or CGST & SGST).
The lessee must ensure ITC is correctly claimed on the new invoice.