Place of supply- Immovable Property – Provisions in the GST law have been laid down in two distinct categories for place of supply of services that are governed by the two distinct sections – Section 12 and 13. Section 12 of the IGST Act, 2017 governs services under GST where the location of the supplier as well as the recipient is within India. However, Section 13 shall be applicable for services under GST when then location of the recipient of service or the location of the supplier of service is outside India i.e. either the supplier or the recipient of service is located outside India.
Within these extensive sections, provisions regarding the services related to immovable property have been laid down in Section 12(3) and Section 13(4) that elaborate on the determination of the place of supply under various circumstances and conditions. Explanations and circulars explaining the intent of the sections are continuously introduced by the lawmakers to avoid litigations and clarifying the issues being raised regularly on the issues related to this issue.
Meaning of an Immovable Property – It is an immovable object, a property that cannot be moved without destroying or altering it. It is fixed to the earth, such as a piece of land or a house. It includes premises, property rights (for example, inheritable building right), houses, land and associated goods, and chattels if they are located on, or below, or have a fixed address.
Services related to immovable property – Section 12(3) – When the location of the supplier as well as the recipient is within India
Case I – Immovable Property – Located In India
Services
- Directly in relation to an immovable property including services of interior decoration, architects, surveyors, engineers;
- By way of lodging accommodation by a hotel, inn, club, guest house by whatever name called including a house boat or any other vessel;
- By way of accommodation in any immovable property for organizing any marriage function, social, cultural, religious or business function, including services provided in relation to such function at such property;
- Any ancillary services to (a), (b) and (c);
Place of Supply of Services under GST
Location where the immovable property or boat or vessel, is located or is intended to be located.
Case II – Immovable Property – Located outside India
If the location of the recipient and supplier is in India but the immovable property is located outside India;
Place of Supply of Services under GST
Location of the recipient.
Examples
(a) Mr. Harish from Gurgaon has approached an architect Mr. Fahim from Goa seeking his professional services in his house in Jaipur.
Place of Supply of Services under GST – Location where the house is located i.e. Jaipur.
(b) Mr. Harish from Gurgaon has approached an architect Mr. Fahim from Goa seeking his professional services in an immovable property in Hong Kong.
Place of Supply of Services under GST – Since both the supplier of service and the recipient of service is located in India and the immovable property is located outside India, it will be Gurgaon i.e. the Location of the recipient.
Services related to immovable property – Section 13(4) – When the location of the supplier or the recipient is outside India
Transaction – Services supplied directly in relation to an immovable property, including services supplied in regard by experts and estate agents, supply of accommodation by way hotel, inn, guest house, club or campsite, by whatever name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including that of architects or interior decorators.
Here, the place where the property is located or is intended to be located will be considered.
Example – Mr. Shiva from Jaipur has been engaged by Mr. Khan from Singapore for providing architecture services for his property in Sri Lanka. Here, the place will be Sri Lanka i.e. the place where the immovable property is located or is intended to be located.
However, where the services are provided in more than one location including a location in the taxable territory, then the provisions of Section 13(6) will be applicable.
Further, where the services are provided in more than State or Union Territory, then the provisions of Section 13(7) read with Rule 8 of the IGST Rules, 2017 will be applicable.
Rule 8 has been inserted in IGST Rules, 2017 vide Notification No. 4/2018 w.e.f. 01.01.2019 which provides that the value of supply shall be determined in accordance with the provisions of Rule 4 of the IGST Rules, 2017.
Rule 4 of the IGST Rules, 2017 has been inserted vide Notification No. 4/2018 – IT w.e.f. 01.01.2019 for determination of place of supply of services under GST, where the immovable property or boat or vessel is located in more than one state or one Union Territory, stating that the supply of such services shall be treated as made in each of the respective States or Union Territories on proportionate basis as explained under:-
(a) Services by way of lodging accommodation by a hotel, inn, club, guest house by whatever name called including a house boat or any other vessel
- Where such property is a single property located in two or more contiguous States or UTs or both
In proportion to the area of the immovable property lying in each State or UT.
- Cases except where such property is a single property located in two or more contiguous States or UTs or both
In proportion to the number of nights stayed in such property.
(b) Services provided by way of accommodation in any immovable property for organizing any marriage function, etc.
In proportion to the area of the immovable property lying in each State or UT.
Let us understand this extract of Rule 4 of IGST Rules, 2017, with the help of the following examples:-
(a) Deluxe Developers have a huge area of land in Uttar Pradesh and some adjoining parts of Bihar measuring about 30,000 sq. ft. in total. The area is Uttar Pradesh is around 20,000 sq. ft. and the rest of the land is in Bihar. Deluxe Developers have engaged an architect for some development work on this land for an aggregate amount of Rs. 60,000.
The place of supply of service under GST will be apportioned on the basis of the area of the land in Uttar Pradesh and Bihar i.e. in the ratio of 2:1.
Therefore,
Value of supply in Uttar Pradesh = Rs. 40,000/- Value of supply in Bihar = Rs. 20,000/-
(b) Mr. Malik has booked rooms in the 2 properties Platinum Hotel at Agra for 3 days and Jaipur for 4 days for his business trip. The hotel has raised a single invoice of the consolidated tariff of 7 days for Rs. 70,000/-.
The place of supply of service under GST will be apportioned on the basis of the number of nights stayed in each property, i.e., in the ratio of 3:4 for Agra and Jaipur.
Therefore,
Value of supply in Agra = Rs. 30,000/- Value of supply in Jaipur = Rs. 40,000/-
(c) Cases except where such property is a single property located in two or more contiguous States or UTs or both
In proportion to the number of nights stayed in such property.
House Boat Accommodation Services
For the services provided by way of lodging accommodation by a house boat or any other vessel and services ancillary to such services, the place of supply of service under GST is determined in proportion on the basis of the declaration made to the effect by the service provider.
Example – M/s Seashore Company provided accommodation services in a house boat to its customers that was in Maharashtra for 10 days and moved to Goa for 2 days. Therefore, the place of supply will be apportioned between Maharashtra and Goa in the ratio of 5:1 on the basis of the declaration given by M/s Seashore Company.