Registration under GST is state centric. As per Sec 22(1), every supplier shall be liable to be registered under GST, in the State or Union territory, from where he makes taxable supply of goods or services or both, if his aggregate turnover in a F.Y exceeds threshold limit. In case of inter-state supply of goods, registration is mandatory irrespective of threshold limit , where as in case of inter-state supply of services, registration is mandatory if the turnover in a F.Y exceeds Rs.20 lakhs (Rs. 10 lakhs in case of special category states). It is pertinent to mention that registration is required ‘in’ the State ‘from which’ taxable supplies are made.
Therefore, for the purposes of obtaining registration, it is important to identify the ‘origin’ of supply even though GST is a ‘destination’ based tax. Tax goes to the destination State but registration is required in the origin-State. In case of “works contract” service which is immovable in nature, place of supply is where the immovable property is located. Place of Supply (as determined from IGST Act) provides the ‘destination’ and this is not relevant for registration. The location of Supplier is relevant for registration.
Under GST laws, the definition of “Works Contract” has been restricted to any composite supply made for an “Immovable Property” unlike the erstwhile VAT and Service Tax regime where composite supply for movable properties were also treated as “works contract”.
As per Section 2(119) of the CGST Act, 2017 “works contract” means a contract for :
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.”
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Thus, from the above it can be seen that the term works contract has been restricted to contract for building, construction, fabrication, repair, maintenance, renovation, alteration or commissioning etc of any immovable property only. Any such composite supply undertaken on goods say for example a fabrication or paint job done in automotive body shop will not fall within the definition of term works contract per se under GST. Such contracts would continue to remain composite supplies, but will not be treated as a Works Contract for the purposes of GST.
As per Para 6 (a) of Schedule II to the CGST Act, 2017, works contracts as defined in section 2(119) of the CGST Act, 2017 shall be treated as a supply of services.
Therefore, a taxable person who is providing works contract service shall be required to obtain registration in the state from where he is providing services.
|As per Sec 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;
As per Sec 2(50), “fixed establishment” means a place (other than the registered place of business) which is characterized 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.
Example 1: A service provider in the business of renting of immovable property services has his registered office at Delhi (place of business) and the property for rent along with an office is located in Mumbai (place of supply). In this case, the registered office will be the principal place of business but the property in Mumbai will NOT be regarded as a fixed establishment of the service provider as the degree of permanence required in representing the interests of the supplier does not exist in Mumbai.
Example 2 :A contract is for supply, installation, testing & commissioning of fire fighting system where the duration of installation work at the site is (say) 3 months, at Chamba, HP and the fabrication of equipment undertaken at the factory at Kolkata. After the fabrication is completed, the material is transported to the site and Engineers & technical teams are deputed for installation, testing & commissioning. For the limited duration, the installation team will be present at the site Chamba HP). In this case, the factory will be the principal place of business (Kolkata) but the site (Chamba, HP) will NOT be regarded as a fixed establishment of the supplier.
Example : 3 M/s GE Electricals Ltd, a company registered in Mumbai is engaged in the business of Supply, installation, testing & commissioning of Switch yard equipment for power station across the country, is registered under GST in the state of Maharastra. The company was awarded a contract of Rs.20 Crores by M/s NHPC Ltd for construction of Switchyard systems for one of its power plants located in the state of Himachal Pradesh. The company (GE Electrical) supply the materials/equipment from their Mumbai factory & depute their technical staffs & engineers to HP for a period of six months, for installation, testing & commissioning of the work. Is M/s GE Electricals Ltd is required to obtained registration under GST in the state of Himachal Pradesh.
Ans. The activity of Supply, installation, testing & commissioning of Switch yard equipment is a composite supply. Since the switch yard equipment are affixed permanently on earth, it is a works contract in relation to immovable property and squarely covered under Sec 2(119) of CGST Act. Further, as per Para 6(a) of Schedule II to the CGST Act,2017, works contract as defined in section 2(119) of the CGST Act,2017 are treated as supply of service. In case of supply of service related to immovable property, location of supply is where immovable property is located. As per Sec 22(1), registration is required in the state from which taxable supply is made. Since the company is making supply of works contract service from Mumbai, registration in Maharastra is required. Further, since M/s GE Electricals Ltd does not have fixed place of business/ establishment in the state of Himachal Pradesh (HP), registration under GST in the state of HP is not required. This view has also been upheld by Authority of Advance Ruling (AAR, Rajastan) in their Order No. Raj/AAR/2018-19/07 Dated 01-07-2018 in the matter of M/s Jaimin Engineering Pvt Ltd.
Example :4 Mr X, a registered person who is engaged in renting of commercial property is having principal place of business in Kolkata but few commercial properties are also located in Delhi, which is let out.Is Mr X is required to obtain registration under GST in Delhi.
Ans. Since the principal place of business is located in Kolkata from where service is provided, registration under GST is required in Kolkata (West Bengal). Registration under GST in Delhi shall be required, if Mr X has any fixed establishment/place of business in Delhi. Mere location of the property in Delhi shall not be treated as place of business, though place of supply of service is Delhi being immovable property.
Example :5 M/s Lanco Infratech Ltd (contractee), having its corporate office in Mumbai awarded a contract for to M/s Gammon Infra Ltd, Hyderbad (contractor) for construction of a Dam in the state of Sikkim. M/s Gammon Infra Ltd is registered under GST in the state of Telangana. The duration of the contract is 3 years. Is the contractor is required to obtain registration under GST in the state of Sikkim.
Ans. As per Sec 22(1) of CGST Act, registration under GST is required ‘in’ the State ‘from which’ taxable supplies are made. Construction of Dam is “works contract” service being immovable in nature nad place of supply is Sikkim where the immovable property is located. For the purpose of construction of Dam, huge qty of Steel, Cement, sand , aggregates, other construction materials & engineer, technician, labour are required. The nature of supply is such that , it can not be supplied from Hyderbad, Telangana. So, a fixed establishment is required in the state of Sikkim, where the work is being carried out.Therefore, registration under GST is mandatory for M/s Gammon Infra Ltd,in the state of Sikkim.
CA. S K Mishra, FCA, LL.B is a Fellow member of The Institute of Chartered Accountants of India , New Delhi & Fellow member of The Institute of Cost Accountants of India, Kolkata. He is author of Amazon best seller books on GST titled “Students’ Guide to GST” published by Mewar University Press. He can be reached at firstname.lastname@example.org, WhatsApp 9805072910.