GST registration for work contract to be executed in another state

Issue: Whether separate registration is required for work contract to be executed in another state other than principal place of business.

Applicant: M/s T & D Electricals  – Advance Ruiling No: KAR ADRG 18/2020 dated 31.03.2020

Provision referred: Section 2(71), 2(89) & 22 of CGST Act 2017 Section 7, 8 ,10 & 12  of IGST Act, 2017

Facts of the case

The applicant is a registered person under Goods & Service Tax Act, 2017 as work contractor and wholesale supplier in Jaipur, Rajasthan. They have been awarded a work contract by M/s Shree Cement Limited, Rajasthan which include complete electrical & instrumentation jobs, installation, testing and commissioning, and IT Jobs at township Karnataka cement project.

The invoices have to be addressed to Karnataka Cement project of M/s Shree Cement Limited.

The applicant does not have any premise in Karnataka as M/s Shree Cement Limited shall provide a temporary small space for office and store in their premise without any written documents as per the contract.

Issue involved:

The legal issues which need to be addressed are as follows:

1. Whether separate registration is required in Karnataka state.

2. Question on levy of Intra state tax or Interstate tax.

a. It registration is not required in Karnataka state and if we purchase goods from Rajasthan supplier and want to ship goods from there to township at Karnataka, whether CGST/SGST would be charged from us or IGST by the Rajasthan supplier  

b. It registration is not required in Karnataka state and if we purchase goods from Karnataka supplier to use the goods at  township at Karnataka, whether IGST would be charged from us or CGST/SGST by the Karnataka supplier  

3. What documents would be required with transporter to transit/ship material at Karnataka site from Rajasthan supplier and in case, supplier is of Karnataka?

Issue 1: Whether separate registration is required in Karnataka state.

Section 22 of CGST Act deals with requirement of registration of every taxable person effecting taxable supply, subject to threshold limit. Section 22 of CGST Act reads as under

22 (1) 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

From bare understanding of this section it can be understood that for the purpose of registration it is important to determine the location of the supplier ,aggregate turnover in a financial year and place of business from where supplier makes a taxable supply.

And location of supplier of service and principal place of business has been defined under section 2(71) & 2(89) of CGST Act respectively but this act is silent on supplier of goods.

2(71) “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;

2(89) “principal place of business” 

means the place of business specified as the principal place of business in the certificate of registration;

So in the instant case, location of supplier (applicant) is Rajasthan, as the supply is made from Rajasthan and a principal place of business would also be Rajasthan for which registration has been obtained (unless he establishes office or establishment in the place where service is to supply.)

Therefore the location of supplier is nothing but the principal place of business which is in Rajasthan. Thus there is no requirement to obtain registration in Karnataka.

Issue 2(a): Question on levy of Intra state tax or Interstate tax if goods is purchased form Rajasthan and supplied to Karnataka.

In this situation, the Supplier i.e. dealer is situated in Rajasthan and recipient of goods i.e. the applicant, both are situated in Rajasthan itself, hence this supply becomes intra state supply by virtue of section 8 of IGST Act. The dealer in Rajasthan has to charge CGST/SGST when the goods purchased by applicant, are shipped to project site in Karnataka under Bill to Ship to transaction in terms of Section 10(1)(b) of IGST Act.

However the applicant has to charge IGST in the invoice addressed to M/s Shree Cement Limited, Karnataka division.

Issue 2(b): Question on levy of Intra state tax or Interstate tax if goods is purchased form Karnataka and supplied to Rajasthan.

In this situation, the Supplier i.e. dealer is situated in Karnataka recipient of goods i.e. the applicant, is situated in Rajasthan and hence this supply becomes interstate supply by virtue of section 7(1) of IGST Act. The dealer in Karnataka has to charge IGST when the goods purchase by applicant, are shipped to project site in Karnataka under Bill to Ship to transaction in terms of Section 10(1)(b) of IGST Act.

However the applicant has to charge IGST in the invoice addressed to M/s Shree Cement Limited, Karnataka division.

Issue 3: The third question related to the documents required to be carried by the transporter of goods to transit/ship material at Karnataka site from Rajasthan supplier and in case, supplier is of Karnataka?

The impugned question does not get covered under the issue on which the advance ruling can be sought under CGST Act 2017, in terms of section 97(2) of said act. Therefore no ruling is given in this issue.

Note:

In terms of section 7(3) of IGST, the supply of service shall be interstate supply where location of supplier and the place of supply are in two different states/union territories.

Further place of supply, in case of work contract service, shall be the location at which immovable property (construction site) is situated as per Section 12(3)(a) of IGST Act.

Hence in given case, location of supplier of service is Rajasthan as covered in Issue-1 and place of location of recipient of service is Karnataka (i.e. place where the construction site is located), hence IGST would be charged on Invoice by M/s T & D Electricals.

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