For small businesses in India, renting a commercial space is more than just a cost — it’s a tax trap. The 18% GST on commercial rent eats directly into profit margins, making survival harder for entrepreneurs operating on thin financial cushions.
A financial influencer took to X to break down how this tax hurts small businesses. “For most ‘good’ businesses, the profit margins are 20%,” he wrote.
“But, if you buy a commercial shop in India. And, rent it. You have to pay 18% GST. So you charge that amount from the tenant (18%) and wipe out his profit margins.”
Under India’s Goods and Services Tax (GST) system, commercial property rentals are taxed at 18%, which landlords typically pass on to tenants. For small businesses, this additional cost can significantly impact cash flow and profitability.
He highlighted how this adds layers of taxation for businesses that are already heavily taxed. “Now the commercial property is an ‘investment’. You have already bought that by paying (20-30% taxes, depends on your tax slab). Charging non-sense taxes. And, hoping that businesses will somehow survive (& create jobs) is just pure madness,” he argued.
The Central Board of Indirect Taxes and Customs (CBIC) recently waived the 18% GST on rent for small taxpayers renting from unregistered landlords. However, businesses renting from registered property owners still have to bear the tax burden.
He also dismissed arguments about ITC benefits, saying: “Now accountants will start: oh there is input tax credit. Buddy, someone pays that 18% GST eventually (your end customer; which potentially reflects in profit margins somewhere).”
