2023 (4) TMI 903 - AAR - GST

Requirement for registration levy of service tax - renting of commercial building - Location of GPA holder - Place of supply - location of supplier - in Karnataka under KGST/CGST Act 2017 - HELD THAT - On examination of the facts that the applicant has given General Power of Attorney (GPA) to his mother Smt. Prabhavathi, Nagarabhavi, Bengaluru quoting the reason that he is working outside India and thus unable to take care of the said commercial property owned by him. It is observed from para 1 of the said GPA that the applicant has nominated / appointed the attorney to induct tenant, to create tenancy and to execute necessary deeds or documents either registering before the Jurisdictional sub-registrar 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. A General Power of Attorney is governed by provisions of Powers of Attorney Act, 1882. It is an instrument empowering the specified person to act for and in the name of the person executing it. It is a legal document whereby one person authorises another to act on his/her behalf. The person authorising is referred to as the 'principal' and the person being authorised under the power of attorney is called an 'agent' - It is evident that though Shri Nagabhushana Narayana, is the absolute owner of property, the act of leasing of immoveable property was taken up by Smt Prabhavathi as a GPA holder of the said property. Also the incomes from the property, including the rent are received and retained by the GPA holder. The activity of leasing or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services in terms of entry 2(b) of Schedule II to Section 7 of CGST Act, 2017 - Smt.Prabhavathi, the GPA holder is the supplier of service of leasing of the building for commercial purposes. In the instant case, since the supply of service is directly in relation to immoveable property, in terms of Section 12(3) of IGST Act, 2017, the place of supply of service shall be the location of the said immoveable property i.e., in Bangalore, Karnataka. 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 IGST Act, 2017 and the taxable person, i.e Smt. Prabhavathi is liable to pay CGST and KG ST of 9% each on the taxable value in terms of entry no 16(iii) (SAC heading 9972) of Notification No. 11/2017 dated 28.06.2017, as amended.

Summary

Issues involved:
The judgment addresses the liability of registration under KGST/CGST Act 2017 for a non-resident Indian owning property in India and renting it out, as well as the requirement to pay tax on renting a commercial building.

Liability to be registered:
The applicant, a non-resident Indian, argued that as he resides outside India and does not have a fixed establishment in India, he is not liable for registration in India or for payment of GST under CGST Act 2017. However, the General Power of Attorney (GPA) granted to his mother empowered her to manage the property, including leasing it out for commercial purposes. The GPA holder, being the supplier of the service of leasing the property, is held liable for registration under Section 22(1) of the CGST Act 2017, as the place of supply and location of the supplier are both in Karnataka.

Tax on renting of commercial building:
The applicant contended that the responsibility to pay tax is on the service recipient under the reverse charge mechanism, and thus he is not liable to pay tax on the rental income. However, it was determined that the GPA holder, as the supplier of the Renting of Immovable Property service, is required to pay CGST and KGST of 9% each on the taxable value of the service provided. The supply of service directly related to immovable property in Bangalore, Karnataka, constitutes intra-state supply, making the GPA holder liable for tax payment under the relevant provisions.

Separate Judgment:
The ruling issued states that Smt. Prabhavathi, the GPA holder, is the supplier of service and is liable to be registered in Karnataka under KGST/CGST Act 2017. Additionally, Smt. Prabhavathi is required to pay tax on the supply of Renting of Immovable Property service of the commercial building.