SAC Code for Renting of Commercial Properties & Buildings: A Complete Guide

Introduction: Why the Correct SAC Code for Your Commercial Property Matters

You’ve just leased out your commercial shop or are renting an office for your new startup. Now, it’s time to create an invoice. But what is the correct SAC code for renting commercial properties, and why is it so important? This simple-looking code on your invoice is a critical component of the Goods and Services Tax (GST) framework in India. The Services Accounting Code, or SAC, is a system used to classify all services, ensuring that the right amount of tax is calculated and paid. Using the wrong code can create a ripple effect of compliance issues, leading to incorrect GST calculations, disputes with tenants over Input Tax Credit, and even potential notices or penalties from tax authorities. This article serves as your definitive guide, breaking down everything you need to know about the SAC code for commercial rentals, its GST implications, and how to report it correctly to stay compliant and keep your business running smoothly.

Understanding SAC Codes: The Basics for Indian Businesses

Before we pinpoint the exact code for commercial rentals, it’s essential to understand the foundation of the system. For many business owners, terms like SAC and HSN can seem like technical jargon, but they are fundamental to GST compliance. Think of them as the universal language for identifying products and services in the tax world. A clear understanding of these codes is the first step towards accurate invoicing and seamless tax filing. This knowledge empowers you to manage your financial obligations correctly, especially when dealing with specific services like SAC code for property rental services, and helps avoid common pitfalls that can disrupt your business operations and financial health.

What is a Services Accounting Code (SAC)?

A Services Accounting Code (SAC) is a unique 6-digit code developed by the Central Board of Indirect Taxes and Customs (CBIC) to classify every conceivable service under the GST regime. Its primary purpose is to systematically identify the services you provide, which in turn helps in determining the applicable GST rate and correctly filing your GST returns, particularly the GSTR-1. To make it easier to understand, you can think of SAC as the equivalent of HSN (Harmonized System of Nomenclature) codes, which are used to classify goods. While HSN codes are globally recognized and can have up to 8 digits, SAC codes are specific to India’s GST system for services. Every time you issue an invoice for a service, you must mention the appropriate SAC, which tells the tax department precisely what service you have rendered.

The Importance of Accuracy in GST Compliance

Accuracy is non-negotiable in the world of GST, and the SAC code is a cornerstone of this principle. Using an incorrect SAC code is not a minor clerical error; it can have significant financial and legal consequences for your business. First and foremost, it can lead to the application of the wrong GST rate. If you mistakenly apply a lower rate, you’ll end up underpaying your taxes, which can attract interest and penalties during a tax audit. Conversely, applying a higher rate unfairly burdens your tenant or client. Furthermore, an incorrect SAC on your invoice can lead to the rejection of Input Tax Credit (ITC) for the recipient of the service. This means your tenant, who is also a business, might not be able to claim the GST they paid on rent, causing business disputes and damaging professional relationships. Ultimately, consistent errors in SAC reporting can flag your business for scrutiny from tax authorities, leading to unnecessary audits and notices.

The Definitive SAC Code for Renting of Commercial Properties: 997211

Now, let’s get to the heart of the matter. For landlords and tenants dealing with business premises, identifying the correct classification is paramount for GST invoicing. The GST framework provides a specific code for this service, leaving little room for ambiguity. Knowing this single code can resolve a significant compliance headache for property owners and businesses across India. This section will clearly identify the code, explain what properties it covers, and differentiate it from residential rentals to ensure you apply it correctly in every situation. Using the right renting commercial properties SAC code ensures that both parties in the transaction are on the right side of the law.

Identifying the Main SAC Code: 997211

The primary and most widely used SAC code for renting commercial properties is 997211. This is the specific code you must use on your invoices when you lease out any non-residential property for business purposes. The official description for SAC 997211 is “Rental or leasing services involving own or leased non-residential property.” This description perfectly encapsulates the act of providing a commercial space to another business or individual for their operations. Whether you are a property owner renting out a single shop or a real estate company managing a large office complex, 997211 is the designated code for your service. Memorizing and consistently using this SAC code for commercial properties India is crucial for accurate tax reporting.

What Types of Properties are Covered Under SAC 997211?

The term “non-residential property” is broad, and it’s helpful to understand the specific types of premises that fall under SAC 997211. This code is applicable to virtually any property that is rented for commercial, industrial, or business activities. To provide absolute clarity, here is a list of common properties covered under this SAC:

• Office spaces for corporate, professional, or administrative use.
• Retail shops, showrooms, and stores in markets or shopping malls.
• Industrial buildings and factory sheds used for manufacturing or production.
• Warehouses and godowns for storage and logistics purposes.
• Land or vacant plots intended for commercial construction or use.
• Buildings or spaces rented for educational institutions, clinics, or coaching centers.

Differentiating from Residential Property Rentals

A common point of confusion is how commercial rentals differ from residential ones under GST. The distinction is simple yet critical. The rental of a residential dwelling intended for use as a residence is exempt from GST. Therefore, you do not need to charge GST or use a SAC code when you rent out a house or an apartment to a family for living purposes. However, the game changes the moment a residential property is used for commercial activities. If you rent out a residential house or apartment to a business to be used as an office, a guest house, or for any other commercial purpose, it loses its GST exemption. In this scenario, the service is treated as a commercial rental, and you must charge 18% GST and use the SAC 997211.

GST Rate & Financial Implications for Commercial Rentals

Understanding the correct SAC code is only half the battle; you must also grasp the associated financial implications, including the GST rate, liability thresholds, and the benefits of Input Tax Credit. The SAC code for rental properties India directly dictates the tax rate you must charge, which impacts your cash flow and the cost for your tenant. For small business owners, both as landlords and tenants, these financial details are crucial for budgeting, financial planning, and maintaining healthy business operations. This section breaks down the numbers and rules governing the GST on commercial rent, ensuring you are well-equipped to handle the monetary aspects of your rental agreements. For a broader overview of how rental income is taxed, see our guide on How to Calculate Tax on Rental Income.

GST Rate Applicable on Commercial Rent

The GST rate applicable to services falling under SAC 997211 is 18%. This is a standard rate for most commercial rental services across India. How this 18% is applied depends on the location of the landlord and the tenant, which determines whether the transaction is intra-state or inter-state.

• Intra-State Supply (within the same state): If the landlord and the tenant are located in the same state (e.g., both in Maharashtra), the 18% GST will be split equally into 9% CGST (Central GST) and 9% SGST (State GST).
• Inter-State Supply (between two different states): If the landlord is in one state (e.g., Delhi) and the tenant is registered in another state (e.g., Haryana), the full 18% will be charged as IGST (Integrated GST).

Who is Liable to Pay GST? The Threshold Explained

Not every landlord needs to charge GST on rent. The liability to register for GST and collect tax arises only when your aggregate annual turnover exceeds a specific threshold. For most states in India, this threshold is ₹20 lakhs per financial year. For special category states (like those in the North-East), the threshold is lower at ₹10 lakhs. It is critical to note that “aggregate turnover” includes all your taxable supplies from all your business ventures, not just the rental income. For instance, if you have a consulting business with a turnover of ₹15 lakhs and earn ₹6 lakhs in rental income, your total turnover is ₹21 lakhs. Since this crosses the ₹20 lakh threshold, you must register for GST and charge it on both your consulting fees and your rental income. For a detailed walkthrough, refer to our Ultimate Guide to GST Registration for Small Businesses. For the most current threshold limits, you can refer to the official GST portal.

Understanding Input Tax Credit (ITC) on Rent

Input Tax Credit (ITC) is one of the most significant benefits of the GST system for businesses. If you are a tenant and your business is registered under GST, you can claim the 18% GST you pay on your commercial rent as ITC. This means the GST paid on rent is not a final cost to your business. You can use this credit to offset your own output GST liability on the goods or services you sell. For example, if you paid ₹18,000 as GST on your office rent and you have a total GST liability of ₹50,000 on your sales for the month, you can use the ₹18,000 ITC to reduce your final tax payment to just ₹32,000. This makes renting a commercial property more tax-efficient for registered businesses. To understand ITC in more detail, read our GST Input Tax Credit (ITC) Full Guide 2025 – Eligibility, Limits & Common Issues.

How to Correctly Report the SAC Code in Your Invoices and Returns

Knowing the theory is one thing, but applying it in practice is what ensures compliance. Correctly reporting the SAC code on your official documents—your invoices and your periodic GST returns—is a mandatory requirement. This procedural accuracy is what allows the entire GST system to function smoothly, enabling seamless verification by tax authorities and effortless ITC claims by your tenants. For services like SAC code for property rental services, clear and compliant documentation is key to avoiding future complications.

Creating a GST-Compliant Rent Invoice

A tax invoice is a legal document, and it must contain specific details to be considered valid under GST law. A compliant invoice is not only a legal requirement for the landlord but also an essential document for the tenant to claim ITC. When preparing a rent invoice for a commercial property, make sure it includes the following checklist of items:

• Header: The invoice must be clearly titled “Tax Invoice”.
• Supplier Details: Your (the landlord’s) legal name, registered address, and GST Identification Number (GSTIN).
• Recipient Details: The tenant’s legal name, registered address, and GSTIN.
• Invoice Details: A unique invoice number and the date of issue.
• Service Description: A clear description of the service, such as “Renting of Commercial Property for the period [Month, Year]”.
• SAC Code: The correct Services Accounting Code, which is 997211.
• Taxable Value: The rent amount before adding GST.
• Tax Breakdown: The rate and amount of CGST and SGST (for intra-state) or IGST (for inter-state).
• Total Value: The final invoice amount, including the GST component.

Reporting in GSTR-1 Filings

As a GST-registered landlord, you are required to report all the invoices you issue in your GSTR-1 return, which is a statement of your outward supplies. This return is typically filed monthly or quarterly, depending on your turnover. When filing your GSTR-1, you must provide the details of the rental income. The invoice information, including the invoice value, tax amount, and the SAC code (997211), is entered under the appropriate section. If your tenant is a registered business (B2B transaction), you will report it under the B2B supplies section, providing their GSTIN. If the tenant is not registered under GST (B2C transaction), it will be reported under the B2C supplies section. Accurate reporting in GSTR-1 is crucial as this data is what populates the tenant’s GSTR-2A/2B, allowing them to claim ITC. For a step-by-step guide, see our article on How to File GST Returns Online: A Step-by-Step Guide of the GST Filing Process & Procedure.

Conclusion: Simplify Your GST Compliance with TaxRobo

Navigating the nuances of GST compliance, from identifying the correct codes to filing timely returns, can be a complex task for any business owner. However, getting it right is fundamental to your business’s health. To summarize, the correct SAC code for renting commercial properties is 997211, and the applicable GST rate is a standard 18%. Ensuring your invoices are accurate and your returns are filed correctly is not just about avoiding penalties; it’s about maintaining a professional relationship with your tenants and allowing them to benefit from the Input Tax Credit mechanism seamlessly. Accuracy in this process reflects well on your business’s diligence and commitment to compliance.

Managing GST compliance can be complex. Don’t let incorrect SAC codes and filing errors disrupt your business. Let TaxRobo’s GST experts handle it for you. Our team of professionals ensures that your invoicing, return filing, and overall GST management are handled with precision and care, keeping you compliant and free to focus on growing your business. Contact us today for a consultation on GST registration, filing, and advisory services.

Frequently Asked Questions (FAQs)

1. What is the SAC code for renting residential property in India?

Answer: Renting a residential dwelling for use as a residence is exempt from GST. Therefore, a SAC code is not typically required on invoices for this service as no tax is being charged. However, this exemption is void if a residential property is rented out for commercial purposes. In that case, it is treated as a commercial rental, and SAC 997211 with 18% GST would apply.

2. Do I need to charge GST if my total rental income is less than ₹20 lakhs?

Answer: Liability for GST depends on your aggregate annual turnover, not just your rental income. If your total turnover from all your business activities (e.g., profession, trading, rent, etc.) combined is below the GST registration threshold (generally ₹20 lakhs for most states and ₹10 lakhs for special category states), you are not required to register for GST or charge it on your rent.

3. As a tenant, can I claim ITC on the GST I pay for my office rent?

Answer: Yes, absolutely. If you are a GST-registered business and you use the rented property for business purposes, you are eligible to claim the full GST amount (18%) paid on your commercial rent as Input Tax Credit (ITC). To do this, you must have a valid tax invoice from your landlord that correctly mentions their GSTIN, your GSTIN, the SAC code, and the tax charged.

4. What is the difference between HSN and SAC codes?

Answer: Both codes are used for classification under GST, but they apply to different categories. HSN stands for Harmonized System of Nomenclature and is an 8-digit code used to classify goods. SAC stands for Services Accounting Code and is a 6-digit code used to classify services. In essence, HSN is for products, and SAC is for services.

5. What happens if I use the wrong renting commercial properties SAC code?

Answer: Using the wrong SAC code can create several complications. It may lead to applying an incorrect GST rate, which could result in a demand for differential tax, along with interest and penalties from the tax department. Furthermore, it can cause problems for your tenant, as a mismatch in the SAC code on the invoice and the nature of the service can be a reason for the tax authorities to dispute their claim for Input Tax Credit.