New GST Rate on Commercial Property Sales and Leasing: The Complete 2026 Guide

Buying commercial property and renting or leasing it are taxed under entirely different GST rules, and both sets of rules have changed meaningfully in the last two years. If you're trying to understand "the new GST rate on commercial property," the honest first step is figuring out which transaction you're actually asking about, since the answer, and who's liable to pay, differs considerably between the two.

This guide covers both precisely: the current purchase-side rate (18% on under-construction commercial property, following GST 2.0's rate rationalisation from 22 September 2025), the lease/rent rate (18%, unchanged through GST 2.0, but now subject to a significant Reverse Charge Mechanism expansion since October 2024), Input Tax Credit eligibility including a genuinely important Supreme Court ruling most guides on this topic haven't caught up with, and the registration and compliance detail that ties it all together.

GST on Buying Commercial Property

Buyers evaluating commercial property should also consider financing, rental yield, location and other costs alongside GST, as explained in our commercial property investment guide.

Under-Construction: 18% with ITC (Up From 12%)

Under-construction commercial property, offices, shops, showrooms, warehouses, and similar, attracts 18% GST with Input Tax Credit available, as of GST 2.0's rate rationalisation effective 22 September 2025. This is a genuine, meaningful change from the earlier 12% rate, and it's worth flagging that some content still circulating online, including at least one recent commercial-property GST guide found in this research, continues to cite the outdated 12% figure. If you're comparing sources, treat any figure below 18% for under-construction commercial property purchase as outdated.

A GST-registered buyer purchasing for a taxable business purpose (running a business from the space, or leasing it out) can generally claim Input Tax Credit on this GST, subject to standard conditions, which meaningfully offsets the real cost compared to a non-registered buyer paying the same GST with no offsetting credit.

Ready-to-Move With a Completion Certificate: Outside GST

Once a commercial property has received its Completion Certificate (CC), a sale of that ready-to-move unit falls outside the GST net entirely. Only stamp duty and registration charges apply, calculated at your state's standard rates. This is the single most consequential timing decision a commercial property buyer can make: purchasing before versus after the CC is issued determines whether an 18% GST liability applies at all.

Buyers should also factor in stamp duty, registration charges, CAM and other acquisition costs when calculating the real cost of buying commercial property.

Pure Land: Outside GST

A standalone sale of land, without any construction or bundled services, also falls outside GST, with only stamp duty applying. Where a plot is sold with bundled development services (roads, drainage, water connections included in the price), the GST treatment can shift depending on how the transaction is structured, so this is worth confirming specifically with the seller's documentation rather than assuming pure-land treatment automatically applies.

GST on Renting or Leasing Commercial Property

Renting or leasing commercial property, offices, shops, warehouses, co-working space, is classified as a "supply of service" under Schedule II of the CGST Act, 2017, and attracts 18% GST (9% CGST + 9% SGST for an intra-state transaction, or 18% IGST for inter-state). This rate applies regardless of the specific document used to grant occupation, a lease deed, a leave-and-licence agreement, an allotment letter, or a shop licence; GST law looks at the substance of the arrangement (granting use, occupation, or access to commercial property) rather than the document's title.

For a broader explanation of how GST applies to property rentals, see our guide to GST rules on renting out residential and commercial property in 2026.

This 18% rate has remained unchanged through GST 2.0's September 2025 rate rationalisation; the changes from that update affected purchase-side rates on under-construction property, not the standard leasing/rental service rate.

Long-term lease premiums (a one-time upfront amount, sometimes called a premium or salami, for a long-term lease) also attract 18% GST on the premium amount. A specific, narrow exemption exists under Notification No. 12/2017 for one-time upfront payments on long-term leases (30 years or more) of industrial plots granted by state or central government entities specifically; this exemption does not extend to private landlords granting a long-term lease.

The Reverse Charge Mechanism: When the Tenant, Not the Landlord, Pays

This is the single most significant compliance change in this space over the last two years, and it's worth understanding in precise detail.

Following the 54th GST Council Meeting's recommendation, effective from 10 October 2024, where an unregistered landlord rents commercial (non-residential) property to a GST-registered tenant, the liability to pay GST shifts from the landlord to the tenant under the Reverse Charge Mechanism (RCM). In this situation:

• The unregistered landlord does not charge or collect GST on the rent invoice.
• The registered tenant calculates the 18% GST themselves, pays it directly to the government (not to the landlord), and prepares a self-invoice to document the transaction.
• The tenant can generally claim this RCM-paid amount as Input Tax Credit, subject to normal conditions, meaning the net cash impact is often neutral over time even though the tenant bears the upfront compliance burden.

Worked example: A registered company rents office space for ₹1,00,000 a month from an individual landlord who isn't GST-registered. GST at 18% is ₹18,000. The tenant, not the landlord, is liable to pay this ₹18,000 directly to the government under RCM, and can then claim it back as ITC against their own output tax liability.

An important exclusion: following the 55th GST Council Meeting, effective from 16 January 2025, a tenant who has opted for the composition levy is excluded from this RCM liability. If you're a composition taxpayer renting from an unregistered landlord, this specific RCM provision doesn't apply to you.

If the landlord is GST-registered, the arrangement reverts to the standard forward-charge mechanism: the landlord charges 18% GST on the rent invoice and remits it themselves, exactly as with any other GST-registered supplier.

Do You Need to Register for GST as a Landlord?

A landlord is required to register for GST once their aggregate annual turnover (rental income combined with any other taxable business income) exceeds ₹20 lakh (₹10 lakh in special category states). Once registered, the landlord must charge and collect 18% GST on commercial rent going forward, following the standard forward-charge process rather than relying on the tenant's RCM liability. Many smaller landlords remain below this threshold and, as a result, their tenants (if GST-registered) end up bearing the RCM liability described above rather than the landlord charging GST directly.

Input Tax Credit: What You Can and Can't Claim

For a GST-registered tenant or buyer, Input Tax Credit is what meaningfully offsets the real cost of GST paid on commercial rent or purchase, provided the property is used for taxable business purposes and proper invoicing (or, under RCM, self-invoicing) is maintained.

One significant, general restriction under Section 17(5)(d) of the CGST Act blocks ITC claims on goods and services used for the construction of an immovable property, even where that property is later used for business purposes, on the theory that the completed building itself is neither goods nor a service being supplied onward.

The Safari Retreats Ruling: ITC on Construction for Leasing

This is a genuinely significant development that most current commercial-property GST content hasn't caught up with. In October 2024, the Supreme Court clarified that ITC can be claimed on construction costs where the construction is essential for providing a taxable leasing or renting service, under what the Court described as the "plant" exception to Section 17(5)(d). In effect, if a building is constructed specifically to be leased out as a commercial income-generating asset, and leasing genuinely is the business being carried on, the construction costs can, in appropriate circumstances, qualify for ITC rather than being automatically blocked.

This is a meaningful, favourable clarification for commercial developers and investors building property specifically for lease, and it's worth discussing directly with a tax professional for any large construction project intended for commercial leasing, since the exact application of the "plant" exception depends on the specific facts of how the property is used.

Mixed-Use Buildings: Residential and Commercial Together

Where a single building contains both residential and commercial units, common in many mixed-use developments, GST applies only to the commercial portion. Residential units sold after the Completion Certificate is issued remain exempt from GST in the same way any completed residential property would be, while the commercial units in the same building remain fully taxable under the rules described above. This distinction is worth confirming clearly in the purchase documentation for any mixed-use property, since the GST treatment isn't uniform across the building simply because it's one project.

GST vs TDS on Rent: Two Separate Obligations

This is worth stating plainly, since the two are frequently and understandably confused. GST on rent and TDS on rent are entirely independent obligations, governed by different laws, with different thresholds and different payers.

Under Section 194-I of the Income Tax Act (renumbered as Section 393 under the Income Tax Act, 2025), a tenant paying annual rent exceeding ₹2,40,000 must deduct TDS, generally at 10% for rent on land or buildings. Critically, TDS is calculated on the base rent amount, excluding GST. If rent is ₹1,00,000 and GST is ₹18,000, TDS at 10% is calculated on the ₹1,00,000 base, giving ₹10,000, not on the GST-inclusive ₹1,18,000 figure. Confirming both obligations are handled correctly, and separately, matters for full compliance on either side of a commercial lease.

Since GST and TDS on rent are separate compliance requirements, landlords and tenants should also understand the applicable TDS rules on rent payments in India.

Subletting: How GST Flows Through the Chain

Where a tenant sublets commercial space to a sub-tenant, this creates a separate, independent taxable supply. The original landlord charges GST to the primary tenant as usual. The primary tenant, now acting as a sub-lessor, separately charges GST to the sub-tenant on the sub-lease arrangement. Input Tax Credit flows through this chain in the ordinary way: the sub-lessor can claim ITC on the GST paid to the original landlord, and separately collects and remits GST on what they charge the sub-tenant. Each leg of the chain is treated as its own taxable transaction under GST law.