Renting commercial property from a Non-Resident Indian (NRI) landlord is becoming increasingly common, particularly in metro business hubs. However, when the landlord is outside India, GST compliance can get tricky — especially with Reverse Charge Mechanism (RCM) rules and the Place of Supply (POS) determination.
This note provides an exhaustive, practical, and law-backed guide to understanding whether GST applies under RCM, and whether CGST+SGST or IGST is payable when the property is in the same state as the tenant’s GST registration.
Legal Backdrop — Why This Matters Now
Until late 2024, renting commercial property generally required forward charge GST — the landlord collected and remitted the tax. Many landlords, especially individuals and NRIs, were unregistered either because their rental income was below the threshold, or simply due to non-compliance.
Problem:
Tax leakage from unregistered property owners.
Solution by Government:
Through Notification No. 09/2024 – Central Tax (Rate) dated 8 October 2024 (effective 10 October 2024), GST liability on renting of commercial property from unregistered persons shifted to the recipient under RCM — irrespective of:
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Landlord’s turnover, or
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Residential status (resident or NRI).
Policy Objective:
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Bring uniformity in tax treatment of commercial rentals.
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Plug GST revenue leakage from unregistered owners.
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Shift tax responsibility to registered tenants who can comply.
NRI Landlords — Are They “Non-Resident Taxable Persons” (NRTPs)?
Definition (Section 2(77), CGST Act):
NRTP = A person who occasionally undertakes taxable transactions in India without a fixed place of business or residence in India.
In our case:
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Renting is continuous supply of service (Section 2(102) + Schedule II).
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The NRI owns immovable property in India — considered a fixed place of business for GST purposes.
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Circular No. 37/11/2018-GST: Ownership and use of property for taxable supply can amount to a place of business.
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Case Law — In re Tagros Chemicals India Pvt. Ltd. (AAR Tamil Nadu): Ownership of land with taxable supplies = place of business.
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Conclusion:
The NRI landlord is not an NRTP here.
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If registered → charges GST under forward charge.
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If unregistered → recipient must pay GST under RCM per Notification No. 09/2024.
RCM Overlap — Domestic RCM vs Import of Service
This transaction technically satisfies both:
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Import of Service (Section 2(11), IGST Act) — Supplier outside India, recipient in India, POS in India.
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Domestic RCM on unregistered supplier — per Notification No. 09/2024.
Compliance reality:
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GST liability is paid only once.
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Classification impacts tax type:
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Import of Service → IGST
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Domestic RCM → CGST + SGST
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ITC is available in both cases if property is used for business.
Best Practice:
Treat as domestic supply under RCM where the property and tenant are in the same state — avoids IGST complications, aligns with state-wise revenue allocation, and fits GST portal logic.
Who Is the ‘Supplier’ in RCM for POS Purposes?
This is where interpretation matters.
Two views:
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Actual Supplier View — POS determined based on landlord’s location → may create unworkable situations where CGST/SGST of another state would need to be paid.
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Deemed Supplier View (Preferred) — Under Section 9(3), recipient is treated as supplier for liability purposes, so for POS:
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Location of recipient = location of supplier (deemed).
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Prevents cross-state mismatch.
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Matches GST Council’s destination-based taxation principle.
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Recommendation:
Adopt deemed supplier approach for RCM POS determination.
Place of Supply — Renting of Immovable Property
Special rule:
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Section 12(3), IGST Act (both parties in India) → POS = location of property.
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Section 13(4), IGST Act (one party outside India) → POS = location of property.
Our case:
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Property in same state as tenant’s GST registration.
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POS = that state → Intra-State supply → CGST + SGST payable under RCM.
Practical Compliance Steps
If landlord is unregistered:
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Raise self-invoice for rent under RCM.
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Pay CGST + SGST in GSTR-3B (Table 4A(3)).
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Claim ITC in the same return (if eligible).
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Keep rent agreement, landlord’s details, and payment proofs for audit trail.
If landlord is registered:
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GST charged under forward charge by landlord; you pay GST to landlord and claim ITC.
Final Position
Facts:
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Commercial property in same state as tenant’s GST registration.
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NRI landlord, unregistered in GST.
Tax Treatment:
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RCM applies under Notification No. 09/2024.
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CGST + SGST payable (not IGST).
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Full ITC available if used for business.
Key Insight:
While the landlord’s NRI status might initially suggest an “import of services” route, the nature of the service (linked to immovable property in India) and RCM notification together make domestic RCM with CGST+SGST the more practical, legally sound, and administratively aligned approach.
