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TOG INSIGHT

Place of supply - renting of immovable property
By P Sivaraman, FCA
Oct 13, 2017

PLACE of supply plays a vital role in the scenario of GST. The place of supply has been notified for various activities under the IGST ACT.

Since the service of renting of immovable property service has got some confusions with regard to registration and place of supply, both in the minds of the consultants and customers, I am here by trying to put some light with regard to the same as per the statute.

Section 22(1) OF THE CGST ACT-REGISTRATION

Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees or in special states if his aggregate turnover in a financial year exceeds ten lakh rupees.

As per the above section, each person has to be registered in the state or union territory from where he makes a taxable supply of goods or services or both, if his aggregate turnover exceeds the above said prescribed limits.

But with regard to renting of immovable property the place of supply is the place where the immovable property is situated as per the statute as below:

Section 12(3)(a)of the IGST ACT-PLACE OF SUPPLY

The place of supply of services,––

- directly in relation to an immovable property, including services provided by architects, interior decorators, surveyors, engineers and other related experts or estate agents, any service provided by way of grant of rights to use immovable property or for carrying out or co-ordination of construction work

- shall be the location at which the immovable property or boat or vessel, as the case may be, is located or intended to be located.

So for renting of immovable property, the place of supply shall be the location of such immovable property.

EXPLANATION TO SECTION 12 OF THE IGST ACT

As per the Explanation to section 12 of the IGST ACT if the place of supply in respect of renting of immovable property services as mentioned above are supplied from more than one State or Union territory, the place of supply of such services shall be taken as being in each of the respective States or Union territories.

Each such service under GST shall be separate Intra state supply and the landlord will have to register in each of such states and to issue Invoices with CGST and SGST for each such state.

The section 12 read with the explanation thereto of the IGST Act is very difficult to apply in practicality for a person whose income is only from renting of immovable property.

For example, a person having commercial properties in the states of Karnataka, Andhra, Kerala, and Tamil Nadu. But he resides in Tamil Nadu. He earns 100% of the income from house properties from these states only. In such a situation it is practically difficult for him to have registration as per section 22(1) of the CGST ACT in all the 4 states and issue Invoice with CGST and applicable state SGST.

Section 22(1) of the CGST ACT as above says that the registration has to be taken in each of the states from where taxable supplies have been made. If you go through sections 12(3) of the IGST Act with respect to the place of supply, it clearly says the place of supply with regard to immovable property shall be the location of such immovable property.

Section 2(15) of the IGST Act which defines the location of the supplier states that the supplier may register under GST in the state in which he usually resides. Since, there is a specific section in the statute with regard to place of supply of "immovable property" which cannot be overridden by such general section.

So, section 12(3) of the IGST ACT read with explanation which deals with place of supply with regard to immovable properties specifically is to be applied in preference to other general sections of the IGST ACT.

So the owners providing renting of immovable property service having properties at multiple locations are left with no choice but to take registration at each of the locations of such immovable properties and to issue Intra state invoices for the following three important reasons;

1) Section 22(1) of the CGST ACT as above says that the registration has to be taken in each of the states from where taxable supplies are made.

2) Section 7(3) of the IGST ACT which talks about Interstate supply which is subject to section 12 of the IGST ACT.

3) Since section 12(3) of the IGST Act says it is a local supply - section 7(3) of the Act cannot override and say it is a Interstate supply.

I invite readers to share their views.

(The views expressed are strictly personal.)