Dear Readers,
The subject of Goods and Services Tax (GST) is often seen as complex, more so when it intersects with cross-border situations like property rentals from Non-Resident Indians (NRIs). In practice, taxpayers, professionals, and even administrators frequently encounter doubts on how liability should be discharged when the landlord resides abroad, but the property—and its use—remains in India.
This article has been written with the intention of simplifying the issue and presenting a structured understanding of the law as it stands. The discussion brings together statutory provisions, judicial precedents, and departmental circulars to provide clarity on whether such transactions amount to an import of services or a domestic supply under the Reverse Charge Mechanism.
My aim is not merely to recite the law but to guide the reader through its practical application, highlight possible interpretational conflicts, and suggest a compliance-oriented approach that minimizes disputes. While the nuances of GST law can be technical, the core message is straightforward: clarity in classification and compliance protects both revenue and the taxpayer.
I hope this write-up serves as a reliable reference for professionals, businesses, and readers who seek to navigate this subject with confidence.
Hope you will find this useful.
Warm regards,
Samir Mahajan
NRI Commercial Property Renting and GST
Renting a commercial property from a Non-Resident Indian (NRI) landlord raises questions regarding GST applicability under the Reverse Charge Mechanism (RCM) and the determination of place of supply. Earlier, the liability to pay GST on commercial property rent rested with the landlord, but since many landlords remained unregistered, this caused revenue leakage. The intent was to ensure uniform taxation, prevent leakage, and shift the liability to registered tenants who are already part of the GST framework. Accordingly, if a registered person rents a commercial property from an unregistered landlord, whether resident or non-resident, GST is payable by the tenant under RCM.
In the case of NRI landlords, renting is considered a regular and continuous supply of services and not an occasional transaction. Since the immovable property is situated in India and used for rental purposes, it constitutes a fixed place of business, supported by judicial precedents such as the Tagros Chemicals India Pvt. Ltd. ruling and Circular No. 37/11/2018-GST. Therefore, an NRI landlord cannot be treated as a Non-Resident Taxable Person (NRTP). Such landlords must either register under GST and charge tax under forward charge, or if unregistered, the tax liability shifts to the tenant under RCM.
A possible conflict arises as the transaction may be seen either as an import of services, since the landlord is located abroad, or as domestic renting under RCM, since the property and recipient are in India. Both interpretations are legally possible, but from a compliance perspective, treating it as a domestic RCM transaction and discharging CGST and SGST ensures clarity and consistency. Another related dilemma is identifying the supplier in RCM. If the landlord is treated as supplier, mismatches occur when the property and landlord are in different states, creating impractical compliance issues. A more accepted approach is to treat the recipient as the deemed supplier under Section 9(3), which aligns with the principle of destination-based taxation and ensures proper state-wise revenue distribution.
Regarding place of supply, Sections 12(3) and 13(4) of the IGST Act specify that for services related to immovable property, the place of supply is where the property is located. Since in this case the property and the tenant are in the same state, the supply is intra-State under Section 8(2), attracting CGST and SGST.
In conclusion, renting commercial property from an unregistered NRI landlord falls under RCM. The place of supply is the property’s location, and where both property and tenant are in the same state, it is treated as an intra-State supply liable to CGST and SGST at 9% each. The tenant must discharge this liability under RCM and can claim input tax credit subject to eligibility. While clarificatory issues exist, the practical approach is to classify the supply as domestic, treat the tenant as deemed supplier, and pay CGST and SGST in the state where the property is located.
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