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Registration in case of renting of immovable property A curious case

Goods and Services Tax - GST - By: - Srinivasan Krishnamachari - Dated:- 28-11-2017 Last Replied Date:- 5-12-2017 - This article is on the applicability of GST when both supplier and recipient of renting of immovable property service are located outside India but the property is situated in India The provisions for determining place of supply of services are given under sections 12 and 13 of the IGST Act. Section 12 determines the place of supply of services where the location of supplier of ser .....

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service is outside India. This section uses the word or , therefore, there arises a question as to which section will apply in case location of both recipient of service as well as supplier of service is outside India. In case of renting of immovable property service, the place of supply is the place where the immovable property is situated. This provision is given in both sections 12 (applicable where location of supplier of service and location of recipient of service is in India) and in sect .....

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cation of supplier as well as the recipient is outside India, since Section 2(11) of the IGST Act defining Import of service requires Service provider to be outside India and recipient to be in India, in addition to place of supply of service having to be in India. In the given case, there are divergent views; One view is that sine the given case would appear to be outside the purview of GST as both the supplier and recipient are outside and hence both Section 12 and 13 may be rendered irrelevan .....

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tates that there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both. Likewise, charging section 5 of IGST Act, 2017 states that there shall be levied a tax called the integrated goods and services tax on all inter-State supplies of goods or services or both. Therefore, to fall under the ambit of either of these provisions of CGST/IGST Act, there needs to be either an intra-state or an inter-state supply of service in this case .....

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a supply of goods or services or both in the course of inter-State trade or commerce. The given case may fall under the residual clause (c) of section 7(5) and accordingly, the supply of service may be treated as inter-state supply and provisions of IGST Act, 2017 will apply, is the said above view. From the above discussion, one thing can be safely surmised that the intention of government is however clear to levy tax in a case where the place of supply is in India. In keeping with the above we .....

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of getting forced out of the purview of Section 13 and get attracted under the ambit of Section 12 of IGST Act. Consequently, CGST and SGST will be payable. This is yet another compulsion that we are faced with here. Again, there is another view that in case of immovable property, it cannot be said that merely because immovable property is situated in India therefore there is some fixed establishment, as there are no human and other resources and as such it cannot be strictly termed as the plac .....

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sion clearly indicates that there is a lot of anomaly in the given situation and is sure to trigger a lot of litigation. Though it is a rare phenomenon, we still need to find a solution to the issue here and hence this article. Let us try to capture the scheme of Section 7 of the IGST Act defining Inter-state supply, so that the readers will have an over view of it to understand its construct in all its ramifications. Section 7(1) is devoted to inter-state trade and commerce of goods happening w .....

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es where the location of the supplier and the recipient are in India but the location of the property is outside India. It achieves it by equating the foreign place of supply to the location of the recipient and thereby imparting the character of domestic inter-state supply to such services of even Immovable property located outside India, with the aid of the said Section 12. Section 7(4) deems all import of services as supply of services in the course of inter-state supply to enable levy of IGS .....

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n 7(4) carefully bears no reference to Section 12 or Section 13 for a reason, that Government reserves the right to levy tax on import of services notwithstanding the fact that the location of both the supplier and the recipient are outside India, with reference to a transaction happening under the ambit of Section 7(4) involving an Immovable property located in India. But at the same time one must also note that Section 7(2) of IGST Act does not find support for deeming exports as an interstate .....

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xable territory, not being an intra-state supply and not covered elsewhere in this section. It is a fact that the sole purpose of deeming the supplies happening in such a residual situation referred therein as amounting to Inter-state supply, is for ensuring a share of revenue to the Centre in the IGST levied and collected thereof. This is known to be the unique purpose of this above provision of the legislation besides providing a clue as to the nature of supply, though not the specific situati .....

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of the IGST Act that relates to services supplied to an individual, represented either as the recipient of service or a person acting on behalf of the recipient, that requires the physical presence of the recipient or the person acting on his behalf, with the supplier for the supply of services . This only means as in the case OIDAR services provided under Section 14 of the IGST Act, even if the Provider of services is not located in India but located abroad, and the service recipient is located .....

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e supply as per the provisions of Section 7(4) ibid. One needs to be further clear that the criteria for determination of a supply, depends on the location of the supplier as much as the location of the recipient/place of performance of service. That is why there is a deeming fiction created under proviso to Section 12 that in the case of location of Immovable property outside the country, the place of supply shall be the location of the recipient. Similarly, in terms of Section 12(2)(b)(ii), th .....

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determine the nature of a given transaction whether it is intra-state or inter-state and it particularly depends a great deal according to me on the relative location of the supplier with reference to the place of actual supply. Therefore, the conclusion is that Section 7 of the IGST Act is not a stand-alone provision to determine the intra-state or inter-state nature of a supply. You need to determine in addition the location of the supplier to arrive at the correct type of tax to be paid i.e .....

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to suffer unlike OIDAR service is that it can t be strictly regarded as provided from outside the Country. Interestingly, in case of goods imported into India, as per Section 11 of the IGST Act, place of supply is the location of the Importer since the subject transaction relates to movable property like goods. When the same thing comes to Immovable property, there comes a hitch as to how to fix it as the location of the owner residing outside India? The only way to enable the levy in this case .....

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a and in India to qualify as Import in the above case is however squarely met in terms of the said Section 2(11) of the IGST Act. Thus charging of IGST and registration by a designated person on behalf of the owner of Immovable property located abroad and remitting the tax himself through his designated representative appear to be a good and compliant solution in this case. When both supplier and recipient of renting of immovable property service are located outside India and property is situate .....

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ne the place of supply in the case of domestic inter-state supply of services. Lastly, it may not be out of context to state that in the case of renting of immovable property for residential purpose, same is not sought to be brought under GST and therefore in the stated circumstances and as also in the case of OIDAR service, when such a service is provided by Business to Consumer, there will be no tax implications under GST. K.Srinivasan IRS The Author is an Assistant Commissioner, GST, Chennai .....

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have discussed the deeming fiction, for the sake of ease relevant para is reproduced: The only way to enable the levy in this case is through creating a deeming fiction under the IGST Act, with reference to the person responsible for payment of tax as it needs to be deemed as an Import to be able to levy and collect IGST. But In the landmark decision of Govind Saran Ganga Saran v. Commissioner of Sales Tax 1985 (4) TMI 65 - SUPREME COURT, the Hon ble Supreme Court held that one of the canons of .....

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