GENERAL POWER OF ATTORNEY HOLDER IS TO TAKE GST REGISTRATION

[Mr. M. GOVINDARAJAN]

General Power of Attorney

A General Power of Attorney (‘GPA’ for short)  is governed by the provisions of Power of Attorney Act, 1882.  The GPA is an instrument empowering the specified person to act for and in the name of the person executing it.  The person authorizing is called as ‘principal’ and the authorized person is called as ‘agent’.  GPA is not for a specific purpose.  The agent can act on behalf of the principal on varied matters.  The act of the agent is binding on the principal.  GPA is given when the principal cannot be present to sign necessary legal documents for financial transactions.  The GPA generally includes the following clauses-

• Material particulars of the principal and the agent;
• The various purposes for which the agent is authorized to act on behalf of the agent; and
• A list of two witnesses who shall affirm the contents of the GPA.

Issue

The issue to be discussed in this article is whether the GPA is liable to register under the provisions of GST Act for its commercial transactions on behalf of the principal and liable to pay GST with reference to an advance ruling given by Authority for Advance Ruling.

IN RE: M/S. NAGABHUSHANA NARAYANA, (THROUGH PRABHAVATHI, GPA HOLDER) - 2023 (4) TMI 903 - AUTHORITY FOR ADVANCE RULINGS, KARNATAKA, the applicant is nonresident Indian residing at California.  He owns a commercial property in Bengaluru and let the same for rent.  The applicant holds an OCI. The applicant has given GPA to his mother Smt. Prabhavathi, Nagarabhavi quoting the reason that he is working outside India and thus unable to take care of the said commercial property owned by him. The applicant sought for advance ruling before the Authority for Advance Ruling, Karnataka on the following questions-

• Whether the applicant is liable to be registered in Karnataka under KGST/ CGST Act, 2017?
• Whether the applicant is required to pay tax on renting of commercial building?

The applicant submitted the following before the Authority for Advance Ruling-

• The applicant is an ordinarily resident outside India and in the belief that he is not liable to be registered in India and also not liable for payment any GST in India.
• Section 24 deals with compulsory registration in certain cases.  Section 2(71) defines the ‘location of the supplier of service’.  Section 2(85) defines ‘the place of business.  Section 2(50) defines fixed places that are to be included under ‘place of business’.
• The applicant does not have any of the fixed establishment in India and therefore the location of his service is outside India.
• A section 12 and 13 of the IGST Act, 2017 determine the nature of supply and is different from the place where the supply is affected.
• The services rendered by him can be construed as import of services as defined under Section 2(11) of the IGST Act, 2017.
• The conditions contained in Section 2(11) of the IGST Act, 2017 are fulfilled and therefore the services would be considered as Inter-State supply in terms of Section 7(4) of the IGST Act, 2017. 
• The Notification No. 10/2017-IGST, dated 28.06.2017 clarifies that the liability to pay tax in case of import of services is stated to be the receiver of services.
• The applicant, therefore, understands that the liability to pay tax on the service supplied by him, if any, is on the service receiver and thus the applicant is not liable to pay tax on the rental income received from the immovable property.
• Section 24 exempts the applicant from registration since he is engaged in making supply of services.
• The tax is liable to be paid on reverse charge basis by the recipient of the service.

The Authority for advance ruling considered the arguments put forth before it on the questions put forth by the applicant and also the facts of the fact.  The Authority for Advance Ruling analyzed the provisions contained in the GPA.  The Authority for Advance Ruling observed that the applicant appointed his mother as GPA to induct tenant, to create tenancy and to execute necessary deeds or documents with the registering authority and to receive all profits, rents, lease advance money, advance security deposit amount from the existing tenant and also from the prospective tenant and to take care all necessary action regarding tenancy of the said scheduled property.  The GPA is also empowered to approach all the regulatory authorities such as BDA, BBMP, BESCOM, BWSSB, METRO to remit taxes to the concerned authorities and to protect and safeguard the said commercial property and also to sign all the required applications, forms and any other papers on behalf of the applicant.   The GPA is also empowered to approach any department and to make necessary application, representation, declarations and requisitions in order to safeguard the overall interests of the scheduled property.  But the GPA has no power either to mortgage or sell or alienate the scheduled property.

The Authority for Advance Ruling observed that in the present case the applicant gave GPA to his mother since he is working outside India to manage his property at Bengaluru.  The GPA holder in pursuance of the authorization created tenancy and included various tenants by way of leasing out the scheduled property for commercial purpose.  The GPA holder also received rent and retained by her. 

The Authority for Advance Ruling further observed that the activity of leasing or letting outthe property for business or commercial either wholly or partly, is a supply of services in  terms of Entry 2(b) of Schedule II to Section 7 of CGST Act.  In terms of section 2(105) of the Act the ‘supplier’ in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include agent acting as such on behalf of the such supplier in relation to the goods or services or both supplied.  Therefore Smt. Prabhavati, the GPA holder is the supplier of service of leasing of the building for commercial purposes.

The GPA holder is a resident of Bengaluru, Karnataka and a supplier of taxable services, is liable to take registration under section 22(1) of the Act.  Since the supply of services is directly in relation to immovable property, in terms of section 12(3) of the IGST Act, the place of supply of service shall be the location of the said immovable property in Bengaluru.  Since the place of supply and location of supplier are both in Karnataka the said supply amounts to ‘intra-state supply’ in terms of section 8(2) of the Act and the GPA holder, the taxable person is liable to pay CGST and KGST.

The Authority for Advance Ruling ruled that-

• Smt. Prabhavathi, the GPA holder is the supplier of services and is liable to be registered in Karnataka under KGST/ CGST Act, 2017.
• Smt. Prabhavathi, the GPA holder is required to pay tax on supply of Renting of immovable property service of the commercial building.