Rental HSN Code: GST Classification, SAC Codes & Latest Rates

Rental HSN Code: GST Classification & Rate Details

For taxation under GST purposes, rental services are classified using Service Accounting Codes (SAC), not HSN codes, which are meant for goods. These codes usually begin with 99.

Rental income from immovable property, like commercial buildings, office spaces, warehouses and godowns, is primarily classified under SAC 9972. This category covers renting and leasing of property for business or commercial purposes. On the other hand, renting or leasing of movable assets like machinery and equipment falls under SAC 9973, which applies to leasing services for goods instead of real estate.

SAC 9972: Renting of immovable property services

The table below outlines the main classifications under SAC 9972, which covers renting and leasing of immovable properties like residential and commercial spaces, along with their applicable GST treatment.

SAC Code	Service Description	GST Rate (%)	Notes
9972	Renting/leasing services of immovable property	As applicable	Covers rental of land, buildings and other immovable assets
997211	Renting or leasing of residential property (houses, flats, etc.)	Nil (if used for residence); 18% under RCM (in specified cases)	GST applies under reverse charge when rented to a registered person, subject to conditions
997212	Renting or leasing of non-residential/commercial property (shops, offices, warehouses, etc.)	18%	Applicable to commercial leasing and business use properties

Note: GST applicability and rates may change based on the latest government notifications and clarifications.

Rental HSN code (SAC 9973) and GST rate

The table below provides a detailed breakdown of SAC 9973, which covers leasing and rental services for movable goods such as machinery, equipment, and other assets, along with their applicable GST rates and related classifications.

SAC Code	Service Description	GST Rate (%)	CESS (%)	Rate Revision
9973	Leasing or rental services, with or without an operator	12 / 18	Nil*	18% / 5% / 12%
997311	Leasing/rental of transport equipment (including containers), with or without an operator	12 / 18	Nil*	18% / 5% / 12%
997312	Leasing/rental of agricultural machinery and equipment, with or without an operator	12 / 18	Nil*	18% / 5% / 12%
997313	Leasing/rental of construction machinery and equipment, with or without an operator	12 / 18	Nil*	18% / 5% / 12%
997314	Leasing/rental of office machinery and equipment (excluding computers), with or without an operator	12 / 18	Nil*	18% / 5% / 12%
997315	Leasing/rental of computers, with or without an operator	12 / 18	Nil*	18% / 5% / 12%
997316	Leasing/rental of telecommunication equipment, with or without an operator	12 / 18	Nil*	18% / 5% / 12%
997319	Leasing/rental of other machinery and equipment, with or without an operator	12 / 18	Nil*	18% / 5% / 12%
997321	Leasing/rental of home entertainment equipment (TVs, radios, projectors, audio systems, etc.)	12 / 18	Nil*	18% / 5% / 12%
997322	Leasing/rental of video tapes and disks	12 / 18	Nil*	18% / 5% / 12%
997323	Leasing/rental of furniture and household appliances	12 / 18	Nil*	18% / 5% / 12%
997324	Leasing/rental of leisure and recreational equipment	12 / 18	Nil*	18% / 5% / 12%
997325	Leasing/rental of household linen	12 / 18	Nil*	18% / 5% / 12%
997326	Leasing/rental of textiles, clothing, and footwear	12 / 18	Nil*	18% / 5% / 12%
997327	Leasing/rental of DIY (do-it-yourself) machinery and equipment	12 / 18	Nil*	18% / 5% / 12%
997329	Leasing/rental of other goods not elsewhere classified	12 / 18	Nil*	18% / 5% / 12%
997331	Licensing services for the use of software and databases	12 / 18	Nil*	18% / 5% / 12%
997332	Licensing services for broadcasting or exhibiting films, audio, and TV programs	12 / 18	Nil*	18% / 5% / 12%
997333	Licensing services for reproduction of original artworks	12 / 18	Nil*	18% / 5% / 12%
997334	Licensing services for reprinting and copying books, journals, and manuscripts	12 / 18	Nil*	18% / 5% / 12%
997335	Licensing services for the use of R&D products	12 / 18	Nil*	18% / 5% / 12%
997336	Licensing services for trademarks and franchises	12 / 18	Nil*	18% / 5% / 12%
997337	Licensing services for use of minerals, including exploration and evaluation rights	12 / 18	Nil*	18% / 5% / 12%
997338	Licensing services for use of natural resources (including telecom spectrum)	12 / 18	Nil*	18% / 5% / 12%
997339	Licensing services for other intellectual property and resources (not elsewhere classified)	12 / 18	Nil*	18% / 5% / 12%

*Note: CESS exemption applies only when certified by the Director (Sports), Ministry of Youth Affairs and Sports, that the services are related to events under the FIFA U-17 Women’s World Cup.

How does GST apply to rent received?

You must charge GST on rent if:

You are a GST-registered landlord.
Your property is rented for commercial purposes.
Your total income exceeds the GST threshold limit (₹20 lakh or ₹10 lakh for special category states).

GST does not apply in the following cases:

Your residential property is rented out for personal use.
Your total rental income is below the GST exemption threshold.
Your lease involves certain types of agricultural land.

Conclusion

Since rental income often constitutes a significant portion of a property owner’s earnings, using the correct rent SAC code along with the applicable GST rate is essential to avoid interest charges and penalties.

However, managing these classifications, tracking GST rates and ensuring compliance manually can be complex, especially if you handle multiple properties or rental streams.

With TallyPrime, you can easily manage rental income, automate GST calculations, generate compliant invoices and track input tax credit seamlessly, all on one platform.

Is TDS applicable to rent, and how does it relate to GST?

Yes, TDS (Tax Deducted at Source) may apply to rental payments under income tax provisions. If the annual rent exceeds ₹2.40 lakh (from AY 2020-21 onwards), the tenant is required to deduct 10% TDS before making the payment to the property owner. The rule applies to commercial as well as residential properties. Additionally, GST (if applicable) is charged separately on the rent amount, and TDS is calculated only on the rent, not on the GST component.

Can businesses claim Input Tax Credit (ITC) on rental services?

Yes, Input Tax Credit (ITC) can be claimed on rental services, provided certain conditions are met. ITC is generally available in cases such as commercial property leasing, renting for business operations and equipment or machinery rentals, where GST is applicable. However, ITC cannot be claimed if the rental service is exempt, such as residential property rented for personal use. Additionally, ITC is not allowed in cases where a concessional GST rate (such as 5%) is opted for without ITC benefits.

Is GST applicable to security deposits for rental properties?

GST is generally not applicable to refundable security deposits, as they are not considered a payment for supply. This is clarified under Section 2(31) of the CGST Act, 2017 (definition of consideration), read with Schedule I and Schedule II. However, if the deposit is later adjusted against rent or forfeited, it becomes consideration for a supply. Consequently, GST will apply to the adjusted or forfeited amount.

Are long-term lease premiums taxable under GST?

Yes, upfront lease premiums (also known as salami) are generally taxable under GST, as they are treated as consideration for renting services. This falls under Schedule II, Entry 2(a) of the CGST Act, 2017, which classifies leasing or renting of immovable property as a supply of services. However, certain exemptions may apply in specific cases, such as long-term leases granted by government authorities for industrial or infrastructure purposes.

How is GST calculated for mixed-use properties, like residential and commercial?

GST on mixed-use properties is calculated based on the proportion of use between residential and commercial purposes. The portion of the property rented out for commercial use, like offices, shops, or business activities, is subject to 18% GST. In contrast, the portion used purely for residential purposes (i.e., as a dwelling) remains exempt from GST, provided it meets the conditions for residential use under GST law. To determine the taxable value, the total rent is usually divided based on factors such as area (square footage), usage agreement, or rental allocation mentioned in the contract. GST is then applied only to the commercial portion of the rent. Proper documentation, like separate rent agreements or clear bifurcation in invoices, is important to justify the split and ensure compliance during audits.

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