GST, TDS and Stamp Duty on a Commercial Lease in India, Explained

The number on a listing is the lease amount. The number that leaves your account each month is different, because three taxes sit on top of or inside it: GST, TDS and, once at the start, stamp duty and registration. None of them is complicated, but mixing them up leads to wrong budgets and awkward conversations with the owner.

This is a plain-language overview. Rates and thresholds change, and states differ on stamp duty, so confirm the current figures with a chartered accountant before you sign.

GST: added on top of the lease amount

Leasing commercial property is a taxable service, and GST applies at 18%.

• Who charges it. An owner who is registered for GST adds 18% to the invoice. Owners must register once their total turnover crosses the registration threshold.
• What it is charged on. The lease amount, and normally common area maintenance and other recurring charges billed under the lease.
• Not on the deposit. A refundable security deposit is not a payment for the service, so GST is not charged on it. If part of the deposit is later adjusted against dues, GST applies to that part.
• Reverse charge. If a GST-registered tenant leases commercial property from an owner who is not registered, the tenant may have to pay the GST directly to the government under the reverse charge mechanism. Ask your accountant whether this applies to you.

Can you claim it back? If your business is GST-registered and makes taxable supplies from the premises, the GST on the lease is normally available as input tax credit, so it becomes a cash-flow item and not a cost. If you are unregistered, under the composition scheme, or make mainly exempt supplies, the 18% is a real cost and should be in your budget.

TDS: deducted by the tenant, not an extra cost

TDS is where most first-time tenants get confused, because it works in the opposite direction to GST.

• The tenant deducts a percentage of each lease payment and pays it to the government on the owner's behalf.
• The owner receives the balance, and claims the deducted amount as a credit against their own income tax.
• So TDS does not change what the lease costs you. It changes who you pay it to.

Points to get right:

• Threshold. TDS applies once the lease amount crosses the limit set in the income tax law. Most business leases for factories, warehouses, showrooms and offices are well above it.
• Rate. For land and buildings the rate has been 10%.
• Calculated before GST. TDS is deducted on the lease amount, not on the GST shown separately on the invoice.
• Your obligations. You need a TAN, you must deposit the tax by the due date each month, file quarterly TDS returns, and issue the owner a TDS certificate. Late deposit attracts interest and penalties, and these fall on you, not the owner.
• PAN. Collect the owner's PAN. Without it, tax has to be deducted at a much higher rate.

A worked example

A 5,000 sq ft warehouse at ₹30 per sq ft per month, with a GST-registered owner and a tenant who is liable to deduct TDS at 10%.

If you can claim input tax credit, the ₹27,000 comes back against your own GST liability, and your real monthly cost is ₹1,50,000. If you cannot, it is ₹1,77,000. That difference, 18%, is worth knowing before you compare two properties.

Stamp duty and registration: once, at the start

• Registration. A lease of immovable property for more than a year has to be registered with the sub-registrar. This is why very short agreements of eleven months are common for small spaces, but they give a business very little security. For a factory, warehouse or fitted-out showroom, a registered lease that matches your investment horizon is worth the cost.
• Stamp duty. Set by each state. It usually depends on the tenure, the average annual lease amount and the deposit, and it can vary widely from one state to the next. Ask a local lawyer or the sub-registrar's office for the exact figure before you finalise the tenure, since a longer lease can move you into a higher slab.
• Registration fee. Charged separately, also by the state.
• Who pays. Negotiable. The tenant often pays, or it is shared. Agree this in the term sheet.

An unstamped or unregistered lease that should have been registered is difficult to rely on in court. If something goes wrong, your lock-in, your deposit terms and your fit-out investment all depend on that document.

What to put in the lease deed

1. The lease amount, stated exclusive of GST, with GST payable in addition at the applicable rate.
2. The owner's GSTIN and PAN, and an obligation to issue a proper tax invoice each month.
3. A clause that payments are subject to TDS as required by law, and that you will issue TDS certificates.
4. Whether maintenance, power backup and other charges attract GST, and who bills them.
5. Who pays stamp duty and registration.
6. Who pays property tax (normally the owner) and any future new levies.
7. How escalation is calculated: on the base lease amount, before taxes.

Our guides to negotiating a commercial lease, security deposits and maintenance charges and the documents you need cover the rest of the deed.

If you are the owner

• Register for GST once you cross the threshold, and quote your lease amount as "plus GST" from the first conversation.
• Expect TDS to be deducted, and check your tax credit statement to confirm the tenant has actually deposited it.
• Keep title papers, tax receipts and approvals ready; see the owner's document checklist.

The short version

Every listing on LeaseOnDemand shows the monthly lease amount and area up front, so you can work out the all-in figure before you visit. Browse commercial property for lease across India, including warehouses, factories, showrooms and office space.

Own commercial property? List it on LeaseOnDemand for free.