Consider a landlord who has licensed commercial premises to a business tenant. The tenant falls behind on rent and, for the months it does pay, applies an escalation rate lower than the one the agreement stipulates. Consumer commissions are faster and cheaper than civil courts, so the landlord is tempted to frame the arrears as a "consumer complaint". Indian law closes that door almost completely: commercial lease and licence disputes are generally not maintainable before consumer forums, because of the commercial-purpose exclusion in the Consumer Protection Act 2019 and because unpaid rent is a breach of a payment obligation, not a "deficiency in service". This article explains why, where such disputes actually belong, and the GST consequences of unpaid commercial rent that give landlords a different kind of leverage.
The Commercial-Purpose Exclusion
The gateway to the Consumer Protection Act 2019 is the definition of "consumer" in Section 2(7), and the definition contains its own exclusion: a person who obtains goods for resale or goods or services for any commercial purpose is not a consumer. The Supreme Court examined this exclusion in Bunga Daniel Babu v. M/S Sri Vasudeva Constructions, (2016) 8 SCC 429, tracing it to the 1993 amendment of the earlier Act:
"…a person who obtains such goods for resale or for any commercial purpose shall not be deemed to be a consumer."
Where the transaction is primarily commercial in nature, the party does not attract consumer protections even if the transaction involves services. A commercial lease or licence fails this test from both directions. The tenant took the premises for business purposes, placing it squarely within the exclusion. And the landlord, collecting rent for the commercial use of its premises, is acting in a commercial capacity — not as a person who has hired services for consideration in a consumer capacity. Neither side of the arrangement fits the statutory mould.
A narrow theoretical exception exists. If the arrangement bundled genuine services — maintenance, utilities, facilities management — and the complaint is that those promised services were deficient, a service-deficiency framing is conceivable. But the complainant would still have to qualify as the person to whom services were provided in a consumer capacity, which is difficult for a commercial landlord, and the exception cannot carry a claim that is in substance about unpaid rent.
Unpaid Rent Is Not a "Deficiency in Service"
Even setting aside the consumer definition, the cause of action does not fit. "Deficiency" under the Act targets fault or imperfection in the quality or manner of performance of a service. The National Consumer Disputes Redressal Commission in Deepak Tyagi v. Shree Chhatrapati Shivaji Education Trust (2020) held that deficiency requires a breach in the quality or manner of performing the service — not a breach of a payment obligation owed by the paying party. A tenant who fails to pay rent, or pays at the wrong escalation rate, has breached a contract; it has not rendered a deficient service. That is debt recovery, and debt recovery belongs in the civil and commercial courts.
Consumer jurisprudence on tenancy points the same way. In Arjun Lal Kesarwani v. M/S Shipra Estates Ltd. (2022), the Uttar Pradesh State Consumer Disputes Redressal Commission, relying on the Supreme Court's decision in Aftab Singh v. Emaar MGF Land Limited, contrasted consumer disputes — rights in rem, non-arbitrable, protected by a special statutory regime — with tenancy disputes, which fall within the category of arbitrable disputes and sit outside the special consumer-jurisdiction framework. Tenancy and rent disputes are the business of the ordinary civil courts, commercial courts and rent tribunals.
One practical caveat from the underlying research: despite this settled position, individual district or state commissions occasionally entertain such complaints at the admission stage, so a landlord (or tenant) drawn into one should be ready with a preliminary objection to maintainability.
The Consumer Framework, for the Rare Case That Qualifies
For completeness — because the framework matters in the rare bundled-services case that survives the exclusion — the key parameters under the 2019 Act are these. Following the Consumer Protection (Jurisdiction) Rules notified on 30 December 2021, the District Commission's pecuniary jurisdiction covers complaints where the value of the goods or services paid as consideration does not exceed ₹50 lakh; jurisdiction is computed on the consideration paid, not on the compensation claimed, a consideration-based approach whose validity the Supreme Court has upheld. Complaints must be filed within two years of the date the cause of action arises or the deficiency is discovered, with a discretion to condone delay on sufficient cause. Territorial jurisdiction under Section 34 lies where the cause of action arises wholly or in part, or where the opposite party resides or carries on business. Where a complaint succeeds, consumer commissions can order refund of the price with interest — at the prescribed rate or, where none is prescribed, 12% per annum from the date of payment — along with compensation for loss caused by negligence or deficiency, costs, and removal of unfair contract terms; and the Supreme Court in M/S National Seeds Corporation Ltd. v. M. Madhusudhan Reddy, (2012) 1 SCC 224, confirmed that "compensation" in this context has a very wide connotation.
None of this rescues a rent-arrears claim. It defines the field the landlord is not in.
Where Commercial Rent Disputes Actually Belong
The appropriate forums are three:
- Commercial courts. Disputes arising out of agreements relating to immovable property used exclusively in trade or commerce are "commercial disputes" under Section 2(1)(c) of the Commercial Courts Act 2015, which covers suits for recovery of rent and possession of such premises. Claims meeting the specified value threshold (₹3 lakh and above) go to the commercial court, with expedited procedures and mandatory pre-institution mediation.
- Ordinary civil courts, where the claim does not meet the commercial court criteria.
- Rent control authorities or tribunals, where state rent legislation applies to the tenancy, offering statutory eviction and recovery procedures.
The remedies available in a civil or commercial suit are comprehensive: a money decree for arrears with interest; a decree for possession evicting the defaulting tenant; damages for use and occupation (mesne profits) where the tenant holds over after termination; costs; and interest until payment. On interest rates, the Delhi District Court's commercial-suit decision in Ankit Jain v. Nidhi Poddar (24 April 2025) is instructive: the landlord claimed 18% per annum on arrears, but the court noted that absent a contractual interest clause or evidence of actual loss at that rate, courts typically award 9% to 12% per annum on unpaid rent. A lease that stipulates a default interest rate, or a landlord who can document borrowing costs incurred to cover the shortfall, can push toward the higher end. Section 34 of the Code of Civil Procedure 1908 supplies the courts' general discretionary power to award interest on money decrees.
Where the tenant has paid at the wrong escalation rate, the shortfall is itself arrears: the claim is the differential between the contracted rate and the rate actually paid for each month, with interest running on each month's shortfall from its due date. The evidentiary spine of such a suit is the licence or lease agreement showing the escalation clause, invoices and demand letters, payment records or bank statements establishing the shortfalls, and any correspondence in which the tenant acknowledges or disputes the arrears. A clear legal notice — itemising the arrears month by month, setting out the contracted versus paid escalation rates, and giving a payment deadline of 15 to 30 days — should precede the suit. Eviction, where decreed, is enforced through execution, with court-directed assistance if the tenant refuses to vacate; note that some state rent control statutes, such as the Delhi Rent Control Act 1958, allow a tenant to avoid eviction for arrears by paying within the time the court stipulates, though that protection does not indefinitely shield repeat defaulters.
The GST Dimension: Unpaid Rent Has Tax Consequences for the Tenant
Commercial letting of immovable property is a taxable supply. Where the landlord is GST-registered, it must charge GST on the licence fee or rent, and the business tenant ordinarily claims input tax credit (ITC) on the GST paid, provided the premises are used for making taxable supplies. That credit comes with a statutory string attached — and for a defaulting tenant, the string tightens.
The second proviso to Section 16(2) of the Central Goods and Services Tax Act 2017 mandates that where a recipient fails to pay the supplier the value of the supply along with the tax within 180 days from the date of the invoice, an amount equal to the ITC availed must be paid back, with interest under Section 50. Rule 37 of the CGST Rules 2017 operationalises this:
- the tenant must reverse the ITC claimed on rental invoices that remain unpaid 180 days after their date;
- interest at 18% per annum applies to the reversed credit;
- the reversal is proportionate — if an invoice is part-paid, only the ITC attributable to the unpaid portion is reversed (reversed ITC = total ITC on the invoice × unpaid amount ÷ total invoice value);
- once the tenant eventually pays the landlord, the reversed ITC can be re-availed in the month of payment through its GST returns.
A tenant that fails to reverse on time compounds its exposure: the GST department may raise a demand for the amount with interest, and penalty and prosecution provisions under the GST law remain in play. A companion provision, Rule 37A, works in the opposite direction — if the landlord collects GST but fails to pay it to the government through its returns, the tenant must reverse the corresponding ITC by 30 November of the following financial year (without interest if done by then; with 18% per annum interest thereafter), even though the tenant paid the landlord in full.
For the landlord, this is negotiating leverage rather than a cause of action: a tenant sitting on unpaid rent past the 180-day mark is not merely accruing contractual interest — it is carrying a mandatory ITC reversal, an 18% interest meter and audit risk. Spelling this out in the legal notice and settlement discussions gives the defaulting tenant an independent financial reason to clear the arrears promptly. The proviso only bites, of course, where GST applies at all: if the landlord is unregistered or below the registration threshold, no GST is charged and no ITC reversal arises.
Practical Takeaways
- Do not file a consumer complaint for commercial rent arrears or escalation shortfalls; it invites summary rejection on maintainability. The commercial-purpose exclusion catches both sides of a business tenancy, and non-payment is not a deficiency in service.
- Route the claim through the commercial court (for premises used exclusively in trade or commerce, specified value ₹3 lakh and above), the civil court, or the rent tribunal where state rent legislation applies.
- Quantify escalation shortfalls month by month as arrears, claim interest from each due date, and seek possession, mesne profits and costs alongside the money decree. Expect 9-12% per annum interest unless the lease stipulates more or actual higher loss is proved.
- Precede the suit with a legal notice itemising arrears, the contracted versus paid escalation rates, and a 15-30 day payment deadline.
- Use the GST angle: remind the defaulting tenant of its Rule 37 obligation to reverse ITC on invoices unpaid beyond 180 days, with 18% interest — a compliance cost that makes early settlement rational.
- Check the state-specific overlay: rent control statutes can alter both forum and eviction procedure, and enforcement of a possession decree can take time if the tenant resists.
Key Authorities
- Consumer Protection Act 2019, Section 2(7) (definition of consumer and commercial-purpose exclusion), Section 34 (jurisdiction) and the reliefs provisions. Source
- Bunga Daniel Babu v. M/S Sri Vasudeva Constructions & Ors., (2016) 8 SCC 429 — Supreme Court on the commercial-purpose exclusion from the consumer definition. Source
- Arjun Lal Kesarwani v. M/S Shipra Estates Ltd. (2022), UP State Consumer Disputes Redressal Commission (relying on Aftab Singh v. Emaar MGF Land Ltd.) — tenancy disputes are arbitrable and outside the special consumer framework. Source
- Deepak Tyagi & Ors. v. Shree Chhatrapati Shivaji Education Trust (2020), NCDRC — deficiency means a fault in performing the service, not the consumer's own payment default. Source
- Consumer Protection (Jurisdiction of the District Commission, the State Commission and the National Commission) Rules 2021 — District Commission jurisdiction up to ₹50 lakh, computed on consideration paid. Source
- M/S National Seeds Corporation Ltd. v. M. Madhusudhan Reddy & Anr., (2012) 1 SCC 224 — "compensation" under consumer law has a very wide connotation.
- Ankit Jain v. Nidhi Poddar, Delhi District Court, Commercial Suit (Comm) No. 280/2024 (24 April 2025) — courts typically award 9-12% per annum on rent arrears absent a contractual rate or proved higher loss. Source
- Commercial Courts Act 2015, Section 2(1)(c) — disputes over immovable property used exclusively in trade or commerce are commercial disputes.
- Central Goods and Services Tax Act 2017, Section 16(2) second proviso and Section 50; CGST Rules 2017, Rules 37 and 37A — ITC reversal for invoices unpaid beyond 180 days, with 18% interest and re-availment on payment. Source
- RFA(COMM) 503/2025, Delhi High Court (13 October 2025) — commercial court jurisdiction over rent disputes and interest computation. Source
This analysis reflects the law as at July 2026. It is published for general information and does not constitute legal advice.