Quick snapshot
- Rent from a commercial property attracts 18% GST.
- GST registration is mandatory for services once aggregate turnover crosses ₹20 lakh in a financial year.
- Aggregate turnover includes exempt supplies, and interest on FDs and savings accounts is treated as an exempt supply.
- So, as per the commonly followed view, rent + bank interest together decide whether you must register.
- Co-owners are generally tested separately, on their own PAN.
Many property owners who rent out a shop or office assume that GST registration is needed only when the rent itself crosses ₹20 lakh a year. If the rent is ₹15 or ₹16 lakh, they conclude that GST simply doesn't apply to them.
That assumption can go wrong. The ₹20 lakh limit is not tested on rent alone. It is tested on your aggregate turnover, and that figure can quietly include the interest you earn on your fixed deposits and savings accounts, even though the deposits have nothing to do with the property.
What "aggregate turnover" includes
Under GST, aggregate turnover is calculated PAN-wise, across India. It covers the total value of:
- Taxable supplies, such as commercial rent
- Exempt supplies
- Exports and inter-state supplies
It does not include GST itself, or the value of purchases on which you pay tax under reverse charge.
The key word here is exempt. A supply can be completely free of GST and still count towards your registration threshold.
Why FD and savings interest gets counted
Under the GST law, extending deposits, loans or advances where the return is earned as interest is treated as a supply of service, and that service is specifically exempt. When you place money in a bank FD, you are, in GST terms, providing a deposit service to the bank, and the interest is the consideration for it.
Since aggregate turnover includes exempt supplies, the interest gets added to your rent when you check the ₹20 lakh limit.
The law does carve out an exception for interest, but only for the goods threshold. A person dealing only in goods is not disqualified from the higher ₹40 lakh limit merely because they also earn interest. There is no matching exclusion for service providers such as landlords.
Note: Some experts argue that personal FD interest earned from savings, with no link to any business, should not be treated as a supply at all and should be left out. There is no specific CBIC clarification on this point. The view that interest is included is the one commonly followed in practice, and the one the department is likely to take, so it is the safer basis for planning.
A simple example
Suppose you own a commercial shop and earn the following in a financial year:
| Income | GST treatment | Amount |
|---|---|---|
| Commercial rent | Taxable at 18% | ₹16,00,000 |
| FD and savings bank interest | Exempt | ₹5,00,000 |
| Aggregate turnover | ₹21,00,000 |
The rent alone is below ₹20 lakh, but aggregate turnover is ₹21 lakh. As per the commonly followed view, GST registration becomes mandatory, and you would need to apply within 30 days of crossing the limit.
What this means for jointly owned property
When a property is owned jointly, for example by a husband and wife, the usual and recommended approach is to treat each co-owner as a separate supplier:
- The lease agreement states each owner's share, such as 50:50.
- Each owner raises a separate invoice for their share, and the rent is paid into their own bank account.
- Each owner's ₹20 lakh threshold is tested on their own PAN: their share of rent, plus their own FD and savings interest, plus any other supplies they make, such as professional fees.
It is generally best to avoid a single joint GST registration as an Association of Persons (AOP). That creates a new taxable entity with its own PAN, and complicates income-tax treatment without any real benefit.
If you do need to register, what changes?
- GST on rent: you charge 18% on the rent and issue GST tax invoices to the tenant.
- No GST on interest: FD and savings interest remains exempt. It is only reported in your returns.
- Returns: with few transactions, the quarterly QRMP scheme usually fits best. It involves GSTR-1 (with optional monthly invoice upload for the tenant's credit), GSTR-3B and monthly tax payment challans.
- Input tax credit: GST paid on repairs, maintenance and brokerage for the let-out property can generally be claimed. GST paid on purchasing the property itself cannot.
- Lease agreement: rent should be stated as exclusive of GST, with both parties' GSTINs recorded. The tenant's TDS is deducted on rent excluding GST.
What if you stay unregistered?
If your tenant is a GST-registered business and you are not registered, the tenant pays 18% GST on your rent under reverse charge. However, this does not remove your obligation to register if your aggregate turnover has crossed ₹20 lakh. Failing to register when liable can lead to tax demands, interest and penalties.
In practice, many brands and corporate tenants also prefer, or require, a registered landlord who issues proper GST invoices. Voluntary registration is often the cleaner choice even when you are close to the limit.
Checklist for property owners
- Add up your own share of commercial rent for the year.
- Add all FD, recurring deposit and savings account interest in your name.
- Add any other income from services, such as consulting or professional fees.
- If the total crosses ₹20 lakh, plan to register before the limit is crossed.
- For joint property, repeat the test separately for each co-owner.
Frequently asked questions
Is GST payable on my FD interest once I register?
No. Interest on deposits stays exempt. Registration only means you charge GST on taxable supplies such as commercial rent and report the interest as exempt in your returns.
Does residential rent count too?
Renting a residential dwelling for use as a residence is exempt, so it also forms part of aggregate turnover for the threshold test. GST is not charged on it, though residential rent paid by a registered tenant can attract reverse charge.
My wife and I co-own the shop. Is the ₹20 lakh limit shared?
Generally, no. Where each co-owner receives their own defined share of rent, each is tested separately on their own PAN, including their own interest income.
The rent will cross ₹20 lakh only next year. Should I register now?
You can register voluntarily at any time. It is often sensible when the tenant prefers GST invoices, or when your turnover is likely to cross the limit during the year.
Renting out a commercial property, alone or jointly? efiletax can check your GST threshold, handle registration for each co-owner, review the GST clauses in your lease and manage your returns.
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