Introduction
In the GST regime a person may either have to mandatory or he may at his will shall voluntarily apply for GST registration. However, despite of complete 3 years of GST in India there are still few grey areas which are required to be analysed in matters of GST registration. In this article we will discuss about registration requirement in case of supply of service of “works contract” & “renting of immovable property”.
Case-
1. ABC Pvt Ltd. having aggregate turnover in excess of Rs 20 lacs & having principle place of business in Delhi & is engaged in supply of works contract in Delhi & Haryana.
2. ABC Pvt Ltd. also own a commercial property in Uttar Pradesh & has a rental income from that property.
Note- ABC Pvt Ltd. has no principle place of business/ fixed establishment in Haryana & UP.
Now, we will discuss above case in the lights of relevant provision of the CGST Act, 2017 & will understand that whether ABC Pvt Ltd. is required to get GST registration in Delhi only or in other states also i.e. Uttar Pradesh & Haryana also.
Relevant Provision-
Sec 2(50) of the CGST Act, 2017-“fixed establishment” means a place (other than the registered place of business) which is characterised by a sufficient degree of permanence and suitable structure in terms of human and technical resources to supply services, or to receive and use services for its own needs;
Sec 2(71) of the CGST Act, 2017- “location of the supplier of services” means,—
a) where a supply is made from a place of business for which the registration has been obtained, the location of such place of business;
b) where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment;
c) where a supply is made from more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the provisions of the supply; and
d) in absence of such places, the location of the usual place of residence of the supplier;
Sec 2(85) of the CGST Act, 2017- “place of business” includes-
a) a place from where the business is ordinarily carried on, and includes a warehouse, a godown or any other place where a taxable person stores his goods, supplies or receives goods or services or both; or
b) a place where a taxable person maintains his books of account; or
c) a place where a taxable person is engaged in business through an agent, by whatever name called;
Sec 2(89) of the CGST Act, 2017 “principal place of business” means the place of business specified as the principal place of business in the certificate of registration;
Sec 2(113) of the CGST Act, 2017 “usual place of residence” means—
a. in case of an individual, the place where he ordinarily resides;
b. in other cases, the place where the person is incorporated or otherwise legally constitute
Sec 2(119) of the CGST Act, 2017 “works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract;
Sec 22 (1) of the CGST Act, 2017- 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:
Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees:
Analysis of the aforementioned case in the light of above relevant CGST Act, 2017 provisions-
From the above case we understand that ABC Pvt Ltd. is engaged in suppling of following below mentioned services-
1. Works contract services in Delhi & Haryana;
2. Renting of immovable property situated in UP.
Service-1 Work Contract Service-
Referring to Works contract definition above, a work contract service shall always be in relation to an immovable property & as per section 12(3)(a) of IGST Act, 2017 in case of Works Contract Services Place of supply shall be the location at which the immovable property (construction site) is located.
Referring to sec 2(71) of CGST Act, 2017 the Location of the Works Contractor shall remain to be the state where his principal place of business is registered (unless he has established his office/establishment in the place where the services are supplied)
Sec 22(1) defines the liability of registration as “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:
Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees.”
Location of Supplier (ABC Pvt Ltd.) shall be Delhi as principal place of business is in Delhi & in Haryana there is no principal place of business/Fixed establishment.
Place of supply shall always be location of immovable property, so if works contract held in Delhi place of supply shall be Delhi & if works contract held in Haryana place of supply shall be Haryana.
Nature of Supply – Works Contract in Delhi to be held as Intra-state transaction & CGST/SGST will be applicable. Works Contract service in Haryana to be held as Inter-state transaction & IGST will be applicable as location of supplier is in Delhi.
Registration is required in Delhi State only as in Haryana there is no principal place of business/fixed establishment.
Relevant case law-
1. AAR, RAJASTHAN in case of Jaimin Engineering (P.) Ltd.
2. AAR, Karnataka in case of M/s T & D electricals.
Service-2 Renting of immovable property-
Again referring to the Sec 22 of the CGST Act, 2017 which depicts liability to get registered under CGST Act if in that state or union territory 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:
Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees.”
Since Rental income is generated from immovable property so it is very much evident that service is supplied to recipient of service via immovable property & thus we conclude that service is supplied from that state where the immovable property is situated & if the aggregate turnover in a financial year exceed Rs 20 Lacs (Rs 10 Lacs in case of special category state), then the person shall be required to get registered in that state where the immovable property is situated.
So if we refer to the case & analysis the above, rental income of ABC Pvt Ltd. is generated from a commercial property which is situated in Uttar Pradesh & therefore service is supplied from that state (Uttar Pradesh) from where immovable property is situated & ABC Pvt Ltd. shall be mandatory liable to get registered in state where immovable property is situated i.e. Uttar Pradesh as his aggregate turnover already exceed Rs 20 lacs.
Further referring to sec 12 of IGST Act, 2017 place of supply in case of immovable property shall be location of immovable property. In our case referred above place of supply shall be Uttar Pradesh. This is an intra-state transaction & CGST/SGST shall be levied.
ABC Pvt Ltd. will also be required to get registration in Uttar Pradesh.
Summary-
In the lights of above GST provision, we observe that in case of works contract there is no need of GST registration in that state where the taxable person does not have principal place of business/fixed establishment. For registration purpose, it would be sufficient for him if he is supplying goods/services or both from that state where he has registered place of business or fixed establishment. He can make supply of works contract service from that location where he is registered & charge CGST/SGST in case of intra state transaction & IGST in case of inter state transaction. However in case of renting of immovable property, rental income is generated from immovable property. Thus, it can be concluded that service is supplied from that state where immovable property is situated & if aggregate turnover crosses limit, person making supplying will be liable to get registered under GST Act, 2017 in that state where immovable property is situated.
Conclusion-
Thus, ABC Pvt Ltd. is liable to get registered in Delhi & Uttar Pradesh only. He shall not be required to get registered in Haryana, however he may voluntary opt for registration in Haryana.
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