Renting of immovable property is a common business activity that falls under the Goods and Services Tax (GST) framework. To classify and standardize services under GST, the Service Accounting Code (SAC) system is used. Understanding the SAC code for renting of immovable property is essential for businesses, landlords, and tenants to ensure proper tax compliance and invoicing.
This guide provides a detailed overview of the SAC code for property rentals, its applicability under GST, tax rates, and other key considerations.
What Is an SAC Code?
SAC stands for Service Accounting Code, a system developed by the Central Board of Indirect Taxes and Customs (CBIC) to categorize different services under GST. Each service is assigned a unique six-digit SAC code, which helps in tax classification, invoicing, and return filing.
SAC Code for Renting of Immovable Property
Under the GST regime, the SAC code for renting of immovable property is 9972. This falls under the Heading 9972, which covers:
- Leasing or renting of residential and commercial properties.
- Renting of land and buildings for business purposes.
- Leasing of industrial spaces and warehouses.
Breakdown of SAC Code 9972
The 9972 SAC code includes various subcategories:
- 997211 – Rental of residential properties.
- 997212 – Rental of commercial properties.
- 997213 – Rental of industrial properties.
- 997214 – Leasing of vacant land.
- 997215 – Rental of buildings for educational or charitable purposes.
Each of these classifications helps determine the applicable tax rates and exemptions.
Applicability of GST on Renting of Immovable Property
Under GST law, renting of immovable property is considered a supply of services and is subject to taxation. However, different tax rates and exemptions apply based on the type of property and usage.
GST Rate on Renting of Property
- Residential property rented for personal use – Exempt from GST (no tax applicable).
- Commercial property rental – 18% GST applies.
- Renting of property by registered businesses – Subject to GST under reverse charge mechanism (RCM) in some cases.
Exemptions Under GST for Renting of Property
Not all rental services attract GST. Some exemptions include:
- Residential properties rented for personal use – No GST is levied.
- Properties rented to charitable organizations – Exempt if used for religious or public welfare activities.
- Renting of agricultural land – Not subject to GST.
For businesses, renting a property for commercial purposes always attracts GST, and the landlord must register under GST if the rental income exceeds ₹20 lakh per year (₹10 lakh for special category states in India).
Who Should Pay GST on Property Rentals?
- Landlords – If the rental income exceeds the GST threshold limit, landlords must charge and collect GST from tenants.
- Tenants (Under Reverse Charge Mechanism – RCM) – If a registered business rents a property from an unregistered landlord, the tenant must pay GST under RCM.
GST Invoice for Property Rental
A GST-compliant invoice for property rental should include:
- Landlord’s GSTIN (if registered).
- Tenant’s details (if applicable).
- SAC code (9972 for property rental).
- Rent amount and applicable GST rate.
- Invoice number and date.
Impact of GST on Renting of Immovable Property
For Landlords
- Must register for GST if rental income exceeds the prescribed threshold.
- Required to issue GST invoices and file GST returns.
- Can claim Input Tax Credit (ITC) for expenses related to rented property.
For Tenants
- If a business is renting property, it can claim ITC on the GST paid.
- Tenants renting from unregistered landlords may have to pay GST under RCM.
Common Issues in GST for Property Rentals
- Confusion Over GST Applicability – Many landlords and tenants struggle to determine if GST applies to their rental agreements.
- Incorrect SAC Code Usage – Using the wrong SAC code may result in tax compliance issues.
- Failure to Register for GST – Landlords earning above the threshold must register, or they risk penalties.
- Issues With Reverse Charge Mechanism (RCM) – Tenants renting from unregistered landlords often overlook RCM requirements.
How to Ensure Compliance With SAC Code 9972
- Verify the correct SAC code on invoices and GST returns.
- Ensure GST registration if rental income exceeds the threshold.
- Understand exemptions to avoid unnecessary tax payments.
- File GST returns on time to prevent penalties.
Understanding the SAC code for renting of immovable property (9972) is crucial for landlords and tenants to ensure GST compliance. While residential property rentals for personal use are exempt from GST, commercial property rentals are taxed at 18% GST.
By following proper tax filing procedures, maintaining correct invoices, and staying updated on GST regulations, businesses and property owners can avoid penalties and maximize tax benefits.