GST pe Charcha - Part 2

[Monarch Bhatt]

In this series, I am trying to cover the issues which are generally faced by the assessee at large and such issues are chosen based on the queries raised in the various seminars delivered by me.

Query: The hotel situated in Mumbai is providing banquet services and while issuing an invoice to one of their guest who is registered in Delhi, hotel has charged IGST on the banquet services. However, auditor of the hotel is saying that hotel shall charge CGST and SGST.

Hotel wants to know:

1. As per the provisions relating to the place of supply of goods or services, whether hotel shall charge IGST or CGST and SGST?
2. Since hotel has already issued the invoice, how they can rectify the mistake wherein, instead of charging CGST and SGST hotel has charged IGST?

Reply: As per the provisions relating to the place of supply of goods or services, hotel is required to charge CGST and SGST or IGST.

1. The query is with respect to the place of supply of service. The place of supply of service to be determined as per Section 12 or section 13 of the Integrated Goods & Services tax Act, 2017 (IGST). In the present case provision of section 12 shall apply as location of the supplier of service and location of the receiver of service is in India. The place of supply of services specified in sub section (3) to (14) of section 12 shall be as provided in that particular sub section. The banquet services provided by hotel are covered under sub section (3) (c) of section 12 of IGST Act, which reads as follows:

“12. Place of supply of services where location of supplier of service and recipient is in India

1. The provisions of this section shall apply to determine the place of supply of services where the location of supplier of services and the location of the recipient of services is in India.
2. The place of supply of services, except the services specified in sub-sections (3)to (14),––(a).......................(b)......................
3. The place of supply of services,––

(a) directly in relation to an immovable property, including services provided by architects, interior decorators, surveyors, engineers and other related experts or estate agents, any service provided by way of grant of rights to use immovable property or for carrying out or co-ordination of construction work; or

(b) by way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by whatever name called, and including a house boat or any other vessel; or

(c) by way of accommodation in any immovable property for organising any marriage or reception or matters related thereto, official, social, cultural, religious or business function including services provided in relation to such function at such property; or

(d) any services ancillary to the services referred to in clauses (a), (b) and (c), shall be the location at which the immovable property or boat or vessel, as the case may be, is located or intended to be located:

Provided that if the location of the immovable property or boat or vessel is located or intended to be located outside India, the place of supply shall be the location of the recipient.

Explanation.––Where the immovable property or boat or vessel is located in more than one State or Union territory, the supply of services shall be treated as made in each of the respective States or Union territories, in proportion to the value for services separately collected or determined in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed. "

It is evident from the above that the place of supply for the banquet services to be treated as the place where immovable property is situated, which is hotel in the present case. The hotel is situated at Maharashtra. Hence, banquets services provided by the hotel will attract Central Goods & Services Tax (CGST) and Maharashtra State Goods & Services Tax (MH SGST).

2. The hotel has charged IGST while issuing an invoice to the receiver. Therefore, hotel shall issue credit note for the amount wrongly charged as IGST and Debit note shall also be issued for recovery of CGST and Maharashtra SGST.

Query: M/s. Solid Construction is situated at Mumbai having Goods & Services Tax (GST) registration at Mumbai, has started new construction project at Bangalore, for which M/s. Solid Construction has appointed M/s. Fair Consultancy as an Architect. M/s. Fair Consultancy is situated at Mumbai and having registration under the Goods & Services Tax (GST) for their Mumbai office and they do not have any other branches across the country.

In this scenario M/s. Fair Consultancy wants to know, whether architectural services provided by them is liable for the payment of Central Goods & Services Tax (CGST) & Maharashtra States Goods & Services Tax (SGST) or Integrated Goods & Services Tax (IGST)?

Reply: M/s. Fair Consultancy is rendering the architectural service which is falling under clause (a) of sub section (3) of section 12 of place of supply of services wherein, the place of supply is in relation to immovable property which is situated at Bangalore. Therefore, M/s. Fair Consultancy rendering the architectural services for immovable property situated at Bangalore from Mumbai. Therefore, the transaction is between Maharashtra and Bangalore which is Inter-State transaction and liable for the payment of Integrated Goods & Services Tax (IGST).

In view of the above M/s.Fair Consultancy being architecture having registered office at Mumbai will be issuing invoice charging Integrated Goods & Services Tax (IGST) to M/s.Solid Construction.

Conclusion: In view of the above generally, the place of supply of services in relation to immovable property will be the place, where the immovable property is situated. The opinion may differ in case supplier is required to get GST registration as casual taxable person.