Small Traders Struggle as 18% GST on Shop Rent Becomes a Financial Burden
Small business owners and traders across India are raising concerns over the 18% Goods and Services Tax (GST) on shop rent, calling it a heavy financial burden in an already challenging economic environment. Many traders argue that the high tax rate is making it difficult to sustain businesses, especially for small shopkeepers and local entrepreneurs. They are now demanding an exemption from GST on rental spaces, stating that it directly impacts their operational costs and overall profitability.
Let’s take a closer look at why traders are protesting against this tax and how it is affecting small businesses.
Why is There an 18% GST on Shop Rent?
Under the GST framework, commercial property rent is categorized as a taxable supply of services, attracting an 18% GST. This applies to traders, shopkeepers, and businesses renting commercial spaces, provided their annual turnover exceeds ₹20 lakh (for services) or ₹40 lakh (for goods).
✅ Who Pays This GST? – The tenant (shopkeeper or business owner) is responsible for paying the 18% GST on rent and can claim input tax credit (ITC) if applicable.
✅ Who is Affected? – Small traders, local shop owners, start-ups, and businesses operating in rented commercial spaces.
How is the 18% GST on Shop Rent Impacting Small Traders?
Many small business owners are struggling to cope with rising operational costs, and the additional 18% GST on rent is making matters worse. Some of the key challenges faced include:
💰 Increased Financial Strain – Small traders already pay high rents in prime business areas. The extra GST adds a significant burden, reducing their profit margins.
📉 Declining Business Sustainability – With rising costs and low consumer spending, many businesses cannot afford the additional tax, leading to store closures or relocation to less expensive areas.
🚫 Limited ITC Benefits for Traders Selling Goods – Unlike service-based businesses, many retail traders cannot claim full Input Tax Credit (ITC) on GST paid for rent, making the tax an added expense instead of a recoverable cost.
🏢 Impact on Local Markets & Small Shops – Small retailers operating in rented shops are disadvantaged compared to larger businesses that own their commercial spaces.
Traders’ Demand: Exempt Shop Rent from GST
Amid growing frustration, traders and small business associations are urging the government to reconsider the 18% GST on rent. Their key demands include:
📌 Complete Exemption for Small Businesses – Traders demand that small shops and businesses be exempted from GST on rent to ensure fair competition and business survival.
📌 Increase in GST Exemption Limit – The government should consider raising the GST exemption threshold for rented shops to support micro and small enterprises.
📌 Reduction in GST Slab – If exemption is not possible, a lower GST rate (e.g., 5% instead of 18%) should be introduced to reduce the financial burden.
📌 Separate Policy for Retailers – Retail traders, who cannot fully utilize Input Tax Credit, should have a different taxation structure compared to service providers.
Government’s Stand on the Issue
The government has not yet announced any relief regarding the 18% GST on commercial rent. Officials argue that GST is a necessary tax under a unified tax system, ensuring a broad revenue base for economic growth. However, given the increasing concerns from small traders, there is growing pressure for the government to review and reconsider this taxation policy.
With Budget discussions and upcoming elections, traders’ associations are hopeful for potential relief measures in the near future.
Final Thoughts: Will There Be Relief for Small Traders?
The 18% GST on shop rent has become a major challenge for small business owners, reducing their profitability and making it difficult to compete with larger retailers. While traders continue to push for exemptions, the government’s response will determine whether India’s small business ecosystem gets the relief it desperately needs.
📢 Should the government exempt small traders from GST on shop rent? Share your thoughts.
