2020 (4) TMI 693 - AAR - GST

Supplier registered in one state doesn't need separate registration for executing contracts in another state under Section 22 CGST Act 2017

The AAR Karnataka ruled that a supplier with principal place of business in Rajasthan executing contracts in Karnataka does not require separate ... Requirement for registration and threshold for registration - location of supplier / principal place of business - place of supply for works contract - bill-to-ship-to rule under IGST - intra-state and inter-state supply characterization - scope of advance ruling under Section 97(2)Requirement for registration and threshold for registration - location of supplier / principal place of business - Whether the applicant is required to obtain a separate GST registration in Karnataka to execute the contract at the Karnataka project site. - HELD THAT: - The Authority found that the applicant's principal place of business is in Rajasthan and the applicant has no other fixed establishment. The location of the supplier is therefore the principal place of business in Rajasthan. Registration is required in the state from where the supplier makes taxable supplies subject to the turnover threshold; as the applicant does not have a fixed establishment at the Karnataka site, a separate registration in Karnataka is not required for execution of the contract. The Authority observed, however, that the applicant is at liberty to obtain registration if it establishes a fixed establishment at the project site. [Paras 7]No separate GST registration in Karnataka is required to execute the project unless the applicant establishes a fixed (permanent) establishment at the project site.Bill-to-ship-to rule under IGST - intra-state and inter-state supply characterization - Tax treatment when goods are purchased from a dealer in Rajasthan and shipped directly to the Karnataka project site (applicant not separately registered in Karnataka). - HELD THAT: - Where both supplier (dealer in Rajasthan) and recipient (the applicant) are located in Rajasthan, the supply is intra-state notwithstanding direct shipment to Karnataka and falls within a bill-to-ship-to transaction under the IGST provisions. Consequently, the dealer in Rajasthan must charge CGST and SGST in its invoice. Separately, when the applicant invoices the project entity in Karnataka, the applicant must charge IGST in its invoice to the Karnataka recipient. [Paras 7]Dealer in Rajasthan to charge CGST and SGST; applicant to charge IGST in its invoice to the Karnataka project entity.Bill-to-ship-to rule under IGST - intra-state and inter-state supply characterization - Tax treatment when goods are purchased from a dealer in Karnataka and shipped to the Karnataka project site (applicant not separately registered in Karnataka). - HELD THAT: - Where the supplier (dealer in Karnataka) is situated in Karnataka and the applicant (recipient) is situated in Rajasthan, the supply constitutes an inter-state supply under the IGST provisions and is covered by a bill-to-ship-to transaction. Therefore the dealer in Karnataka must charge IGST in its invoice. The applicant, when invoicing the Karnataka project entity, must also charge IGST. [Paras 7]Dealer in Karnataka to charge IGST; applicant to charge IGST in its invoice to the Karnataka project entity.Scope of advance ruling under Section 97(2) - Whether the Authority will rule on the documents required to be carried by the transporter for shipments to the Karnataka project site. - HELD THAT: - The Authority held that the question on documents to be carried by the transporter does not fall within the matters on which an advance ruling can be sought under the cited provision. As such, the Authority declined to give any ruling on that question. [Paras 7]No ruling is given on the documents required to be carried by the transporter as the question is outside the scope of advance ruling under Section 97(2).Final Conclusion: The Authority ruled that no separate Karnataka registration is required unless a fixed establishment is created; it clarified the tax treatment for bill-to-ship-to supplies from Rajasthan dealers (CGST & SGST) and from Karnataka dealers (IGST), and declined to rule on transporter documentary requirements as outside the scope of advance ruling. Issues involved:1. Requirement of separate registration in Karnataka state for executing a contract.2. Charging of CGST & SGST or IGST based on the location of the dealer and recipient.3. Documentation required for transporting goods from Rajasthan and Karnataka to Karnataka Cement Project.Analysis:Issue 1: Requirement of separate registration in Karnataka state for executing a contractThe applicant, a registered works contractor in Rajasthan, sought an advance ruling on whether separate registration is needed in Karnataka for a project awarded by M/s. Shree Cement Ltd. The Authority ruled that as the applicant's principal place of business is in Rajasthan and they do not have any fixed establishment in Karnataka, no separate registration in Karnataka is required for executing the contract.Issue 2: Charging of CGST & SGST or IGST based on the location of the dealer and recipienta) If goods are purchased from a dealer in Rajasthan and shipped to Karnataka, both the dealer and recipient are in Rajasthan, making it an intra-state supply. The dealer must charge CGST & SGST, while the applicant must charge IGST in the invoice addressed to the project site in Karnataka.b) If goods are purchased from a dealer in Karnataka and shipped to Karnataka, it becomes an inter-state supply. In this case, the dealer in Karnataka must charge IGST, and the applicant must also charge IGST in the invoice addressed to the project site in Karnataka.Issue 3: Documentation required for transporting goods to Karnataka Cement ProjectThe question regarding the documents required for transporting goods from Rajasthan and Karnataka to the project site was deemed not covered under the issues for which an advance ruling can be sought under the CGST Act 2017. Therefore, no ruling was provided on this question.In conclusion, the ruling stated that the applicant does not need a separate registration in Karnataka for the project. It clarified the tax implications based on the location of the dealer and recipient for intra-state and inter-state supplies. Additionally, it highlighted the limitation on seeking a ruling for certain documentation requirements for transporting goods.