Three everyday situations throw up GST questions that don't follow the ordinary rules: running a restaurant, renting out property, and dealing in real estate. Each has its own treatment — special schemes, exemptions, and credit restrictions — and the common thread is that the headline rate is rarely the whole story. Here's how GST applies across the three.
Reviewed by CA Harika Chebolu, FCA · Last updated 2026-06-15
Quick answer
Restaurants, renting out property and real estate each carry their own GST quirks — from restricted credit to exempt supplies. Here's a practical overview.
Restaurant services have their own treatment under GST, and a defining feature for many restaurants is that the way their supply is taxed comes with restricted input tax credit — so the tax you pay on inputs may not be fully claimable against the tax on your sales. This makes the credit position, not just the rate, central to pricing and margins. Because the treatment depends on the type of establishment and how it operates, confirm where your restaurant falls before assuming you can claim credit on your purchases.
GST on renting turns heavily on what is rented and to whom. Renting of residential property and renting of commercial property are treated differently, and the position can also depend on whether the tenant is registered. Some letting is exempt while other letting is taxable, and reverse charge can come into play in particular situations. Because the outcome is so fact-dependent, the safe approach is to check the specific combination of property type, tenant and use rather than applying a single rule to all rent.
The sale of completed, ready property — where the whole consideration is received after completion — generally falls outside GST, because it is a transaction in immovable property rather than a supply of goods or services. By contrast, under-construction property, where you are effectively buying a construction service, is treated differently and can attract GST. The line between the two turns on timing and what exactly is being transferred, so the status of the property at the point of sale is what determines the treatment.
Credit is one of the trickiest areas here. Input tax credit on works contracts and on goods or services used to construct immovable property can be restricted, particularly where the construction is on the recipient's own account. Developers, landlords building to let, and businesses constructing their own premises can all be affected differently. The credit question should be worked out for the specific facts — who is constructing, for whom, and to what end — rather than assumed to be freely available.
Across restaurants, rent and real estate, the recurring lesson is that classification drives everything: whether a supply is taxable or exempt, whether credit is available or blocked, and which scheme applies. Getting it wrong tends to surface later as a mismatch or a notice, and tax found short-paid attracts interest at 18% per annum. The practical move is to settle the classification and credit position upfront for your specific arrangement, and document the reasoning, so your filings are consistent and defensible.
Because restaurant services have a specific GST treatment that, for many restaurants, comes with restricted input tax credit — so tax paid on inputs may not be fully claimable. The exact position depends on the type of establishment, so confirm where yours falls before assuming credit is available.
It depends on what is rented and to whom — residential and commercial letting are treated differently, some letting is exempt, and reverse charge can apply in particular cases. Because it is so fact-dependent, check the specific combination of property type, tenant and use.
Generally, selling completed property where the consideration is received after completion falls outside GST, while under-construction property can attract it. The treatment turns on timing and what is being transferred, so the status of the property at the point of sale decides it.
Running a restaurant, letting out property or dealing in real estate and unsure how GST applies? Write to the firm and we'll work out your classification, credit and exemptions for your exact situation.