When Does a Tenant Pay GST on Rent Under Reverse Charge?

A GST-registered tenant pays GST on rent under reverse charge in two situations. The first is any rented residential dwelling, whoever the landlord is. The second is a shop, office, godown or other non-residential property taken from an unregistered landlord, unless the tenant is a composition taxpayer. In both cases the landlord does not charge GST; the tenant works out 18% on the rent, pays it in cash and reports it in its own return.

These two rules sit in separate entries of the same notification, came in on different dates and have different exceptions. Most errors in rent RCM come from mixing them up, so this walk-through takes each entry on its own, then shows how a tenant with three rented premises should work out one month's liability. The position stated here was checked against the notifications as on 14 November 2026.

Two entries in Notification 13/2017 decide who pays

Notification No. 13/2017-Central Tax (Rate) lists the services on which the recipient, not the supplier, pays GST. Two of its serial numbers deal with renting of property by private landlords.

Entry 5AA was inserted by Notification No. 05/2022-Central Tax (Rate) with effect from 18 July 2022. It covers "service by way of renting of residential dwelling to a registered person". The supplier column says "any person" and the recipient column says "any registered person". So the landlord's own registration status does not matter. Even a GST-registered landlord who rents a flat to a registered tenant does not charge GST on it; the tenant pays.

Entry 5AB was inserted by Notification No. 09/2024-Central Tax (Rate) with effect from 10 October 2024. As corrected by the corrigendum of 22 October 2024, it covers renting of "any immovable property other than residential dwelling", where the supplier is "any unregistered person" and the recipient is "any registered person". Here the landlord's status is decisive: a registered landlord of a shop or office charges GST in the normal way on its own invoice, and only an unregistered landlord's rent shifts to the tenant.

A third entry, 5A, separately puts rent paid to the Central Government, a State Government, a Union territory or a local authority under reverse charge when the tenant is registered. It follows its own wording and is not discussed further here.

Residential dwellings: what entry 5AA catches and what it leaves out

Renting a residential dwelling for use as a residence was fully exempt until 17 July 2022. From 18 July 2022 the exemption entry no longer covers a dwelling rented to a registered person, and entry 5AA moved the tax on that rent to the tenant. The entry looks at the nature of the property and the registration of the tenant. It does not ask what the tenant uses the flat for, so a company that rents a flat as housing for its managers, a guest house for visiting staff or a small office in a residential flat is inside it.

The one carve-out came through Notification No. 15/2022-Central Tax (Rate), effective 1 January 2023. It added an explanation to the exemption entry so that it still covers renting of a residential dwelling to a registered person where both conditions hold:

• the registered person is the proprietor of a proprietorship concern and rents the dwelling in his personal capacity for use as his own residence; and
• the renting is on his own account and not that of the proprietorship concern.

The explanation is written for proprietors. A partnership firm, LLP or company that rents a flat for a partner or director is the registered person itself, so the carve-out does not reach it. For a proprietor, the evidence that keeps the rent personal is practical: the lease in his own name, rent paid from a personal account, and no rent debited in the business books or claimed as a business expense.

Shops, offices and godowns: entry 5AB and the composition carve-out

Before 10 October 2024, rent paid to an unregistered landlord for a shop or office carried no GST at all. Many individuals who own one or two commercial units are below the registration threshold, so this was a large gap. Entry 5AB closed it by making the registered tenant pay.

The first version of 5AB also caught composition taxpayers, who cannot take input tax credit and so bore the tax as a cost. Notification No. 07/2025-Central Tax (Rate), dated 16 January 2025, amended the recipient column of 5AB to read "any registered person other than a person who has opted to pay tax under composition levy". According to the GST Council newsletter for January 2025, Circular 245/02/2025-GST regularised the position for 10 October 2024 to 15 January 2025 on an "as is where is" basis for composition tenants. Note that this change is confined to 5AB. A composition taxpayer who rents a residential dwelling is still a registered person for entry 5AA.

Two checks matter before applying 5AB. First, confirm the landlord really is unregistered: ask for a GSTIN and search it on the portal, because a registered landlord must charge GST on its own invoice and the tenant should not pay it again under reverse charge. Second, classify the property correctly. A flat used entirely as an office is still a residential dwelling by construction, and whether it falls under 5AA or 5AB is a question of facts that the tenant should settle in writing before the first month's return.

Rate and value: 18% on the rent actually charged

Renting of property is classified under real estate services, Heading 9972. In Notification No. 11/2017-Central Tax (Rate), serial number 16, item (iii) "real estate services other than (i) and (ii)" carries central tax at 9%, with an equal state tax, giving 18% for an intra-State supply. Reverse charge changes who pays, not the rate. The tax is worked out on the rent and any other amount the landlord charges for the same supply, such as maintenance billed together with rent. A refundable security deposit is not rent while it remains refundable; if it is adjusted against rent later, the adjusted amount becomes part of the value at that point.

A worked month: one tenant, three premises

Illustration. Kavya Traders LLP is a regular (non-composition) GST-registered trader in Pune. For November 2026 it pays the following rent, all for property in Maharashtra:

• ₹45,000 for a shop owned by an individual who is not registered under GST;
• ₹30,000 for a flat taken in the LLP's name as housing for its store manager, owned by an individual who is not registered;
• ₹80,000 for a godown owned by a GST-registered company.

The LLP's reverse charge liability for the month is ₹8,100 + ₹5,400 = ₹13,500. The ₹14,400 on the godown is charged by the landlord on its invoice and reaches the LLP through GSTR-2B as ordinary credit. If the flat had been owned by a GST-registered landlord, the answer would not change: entry 5AA would still put the ₹5,400 on the LLP, and the landlord's invoice would show no GST.

Had Kavya Traders been a composition taxpayer, the shop rent would carry no reverse charge from 16 January 2025, while the flat would still attract ₹5,400 under 5AA.

Paying the tax: self-invoice, timing and the cash ledger

Self-invoice within 30 days

Where the landlord is unregistered, the tenant must issue the invoice itself. Rule 47A of the CGST Rules, in force from 1 November 2024, requires a registered person liable to pay tax under section 9(3) or 9(4) to issue that invoice within thirty days. The clock runs from the date of receipt of the supply. For monthly rent, a self-invoice for each month's rent is the simplest way to meet this.

Which month the tax belongs to

Section 13(3) of the CGST Act fixes the time of supply for reverse charge services as the earliest of three dates. The first is the date of payment as entered in the recipient's books or debited in its bank account, whichever is earlier. The second is the date immediately following sixty days from the supplier's invoice, where the supplier issues one. The third is the date of the recipient's own invoice, where the recipient issues it. If none of these can be determined, it is the date of entry in the recipient's books.

So rent paid in advance on 2 November 2026 for November falls in November, and rent for a month that is self-invoiced before it is paid falls in the month of the self-invoice.

For a residential flat owned by a registered landlord, the landlord's invoice (without GST) starts the sixty-day clock under clause (b). Rent unpaid for more than sixty days after that invoice still becomes taxable for the tenant on the sixty-first day.

Cash, not credit

Section 49(4) of the CGST Act allows the balance in the electronic credit ledger to be used for payments towards output tax. The WIRC of ICAI material on reverse charge explains that the definition of output tax in section 2(82) excludes tax payable on reverse charge, so the credit ledger cannot discharge it. In the example, the LLP must pay the ₹13,500 from its electronic cash ledger, even if it has ample credit sitting in the credit ledger.

Reporting in GSTR-3B and taking the credit back

The GST portal FAQ on Form GSTR-3B maps reverse charge liability to Table 3.1(d), "inward supplies liable to reverse charge", and the corresponding credit to Table 4A(3). Both are auto-drafted from GSTR-2B, which is built from what suppliers report. An unregistered landlord files nothing, so 5AB rent and 5AA rent from unregistered landlords will not appear in GSTR-2B.

The tenant has to add these amounts manually; the FAQ confirms that auto-drafted values in GSTR-3B are editable, and the matching credit added in Table 4A(3) will show as an upward edit with a warning that does not stop filing. A registered landlord of a flat should report its invoice with the reverse charge flag in GSTR-1, so that rent may flow through GSTR-2B. Reconcile the two lists every month, and see how GSTR-1 and GSTR-3B data link up if the auto-drafted figures look wrong.

Whether the tenant can claim the tax paid as input tax credit is a separate question, decided by sections 16 and 17 of the CGST Act. The premises must be used in the course or furtherance of business and the credit must not be blocked. Paying the reverse charge does not depend on the answer. A tenant that pays the tax but cannot take credit, or makes partly exempt supplies, bears all or part of the 18% as a cost, which is worth knowing before signing a lease for staff housing.

On the landlord's side, a registered landlord of a residential flat reports the rent as an outward supply on which the recipient pays tax, not as an exempt supply. The reasoning is set out in why outward reverse charge supplies must not be shown as exempt in GSTR-3B. The same mechanics (self-invoice, cash payment, Table 3.1(d)) apply to other reverse charge services such as sitting fees and commission paid to directors.

Small businesses that are not yet registered

A person who is not registered under GST is outside both entries, because each needs a registered recipient. That is why a salaried employee renting a flat, or an unregistered shopkeeper renting a shop, pays no GST on rent. Section 24 of the CGST Act lists "persons who are required to pay tax under reverse charge" among those who must register notwithstanding the turnover threshold, but entries 5AA and 5AB themselves only apply once the tenant is registered. The practical effect runs the other way: the day a business takes GST registration, every residential flat and every shop from an unregistered landlord that it already rents starts attracting reverse charge from that date.

Build the rent RCM calculation into the first GSTR-3B after registration.

Rent mistakes that show up in GST scrutiny

• Treating a registered landlord's flat as outside RCM. Entry 5AA covers "any person" as supplier. A GST-registered landlord renting a flat to a registered tenant does not charge GST, and the tenant still pays.
• Assuming residential use removes the tax. For a registered tenant other than a proprietor renting his own home, residential use does not help under 5AA.
• Applying the proprietor carve-out to a firm or company. The explanation added from 1 January 2023 names the proprietor of a proprietorship concern renting in his personal capacity. Partners and directors are not covered when the firm or company is the tenant.
• Paying 5AB tax when the landlord is registered. If the landlord of a shop has a GSTIN, it must charge GST itself. Paying again under reverse charge duplicates the tax.
• Using credit to pay the reverse charge. Section 49(4) does not permit it, and an amount set off from the credit ledger remains unpaid.
• Waiting for GSTR-2B. Rent from unregistered landlords never appears there. Without a manual entry in Table 3.1(d), the liability is simply missed.

Rent TDS under the Income-tax Act runs on a different set of tests and does not depend on the GST position. The payer, threshold and form rules are covered in the TDS on rent guide for sections 194-I and 194-IB and Form 141. For the GST side, the quickest year-end check is to pull every rent ledger and tag each lease as 5AA, 5AB, registered landlord or exempt. Then match the 5AA and 5AB total to the reverse charge paid in Table 3.1(d) across the year. Any shortfall found before a notice can be paid with interest through Form DRC-03.