CA Harsh Kaushik
As we all know the Renting of Immovable Property is one of the debatable topics with regards to it Place of Supply, Registration and other aspects.
However I am sharing my views on the GST applicability on Renting of Immovable Property
Under GST Regime, *’renting of immovable property’ is included in schedule II which defines it as the supply of services on which the GST rate is 18%*. However Entry no. 12 of exemption *Notification no. 12/2017 dated 28.06.2017* exempts the services by way of *renting of residential dwelling for use as a residence,* meaning thereby that if the residential dwelling is leased out for commercial purposes then no exemption will apply and the rental from such *residential property being leased out for commercial activity shall be taxable to GST*
*Supply is Interstate or Intrastate, a tricky proposition*
Service tax was a Central Tax there was no State Tax on services. But in GST regime we need to *bifurcate the supply of services into interstate supply and intrastate supply* has arisen such that the portion of state tax can go to the State of consumption of services.
For this purpose *’Place of Supply of Services’ [refer to section 12 of IGST Act]* and second is the *location of supplier of services’ [refer to section 2(15) of IGST Act]*
If these two coordinates fall in two different States then it is an interstate supply and if both of these two coordinates fall in the same state then it is an intra-state (local) supply.
Now going by the above yardstick let us see what will happen to a case of rental from immovable property. Let us take an example of a landowner who is located in Delhi and owns an immovable commercial property in Mumbai which he has rented out there at. The question is whether the land owner will have to take GST registration in the State of Maharashtra which is undisputedly the place of supply or instead whether the land owner can take GST registration in Delhi which is his usual place of residence and treat it as interstate supply and accordingly charge IGST. For that let us examine the above two co-ordinates.
a. Place of Supply
As per section 12(3) of IGST Act the place of supply of service in relation to an immovable property shall be the location at which the immovable property is located. Therefore, in this case, the place of supply is undisputedly Mumbai because the property is located thereat.
b. Location of supplier
For this the reference is directed to section 2(15) of IGST Act. Section 2(15) contains four clauses (a),(b),(c),(d) to determine the location of the supplier of service.
Clause (a) says that location of a supplier means a place of business wherefrom the supply is made. To fulfill this test we have to see whether the land owner is having any place of business in Mumbai just by having an immovable property thereat.
For the meaning of ‘place of business’ reference is directed to section 2(85) of CGST Act which defines a ‘place of business’ wherefrom a business is ordinarily carried on and/or where a warehouse or go down or any other place for storage of goods is located and/or books of accounts are maintained and/or the business through agent is carried on.
Just having an immovable property doesn’t qualify this test as per section 2(85) of CGST Act, so in our example there is no ‘place of business’ of the landlord in Mumbai.
Now let us examine clause (b) whether the land lord is having fixed establishment in Mumbai and for that reference is directed to section 2(50) of CGST Act, wherein a fixed establishment is a place which is characterized by a sufficient degree of permanence and suitable structure in terms of human and technical resources. This test of having human and technical resources is also not qualified by just having immovable property at Mumbai. So Clause (b) has no application in our case.
Now let us examine Clause (c) of Sec 2(15) of IGST Act. It pertains to a supply of service from more than one establishment and thus has no application in our case.
Therefore our case finally falls in the residual clause (d) which says that in the absence of clause (a),(b),(c) being applicable, the location of usual place of residence shall be the location of the supplier of services within the meaning of clause (d) of sec 2(15) of IGST Act.
Therefore in our example the location of the landlord will be Delhi while the place of supply will be Mumbai and hence as per section 7 of IGST Act this will be an interstate supply subject to IGST and there is no need for the landlord to take GST registration in the Mumbai (State of Maharastra).
The above conclusion are subject to author own viewpoint, hence viewers may have some different viewpoint also.