2023 (4) TMI 903 - AAR - GST

GPA holder leasing commercial property for NRI owner liable for GST registration and payment

The Karnataka AAR held that a GPA holder leasing commercial property on behalf of an NRI owner is liable for GST registration and payment. The applicant, ... Supplier - supply of services - renting of immovable property - general power of attorney - supplier includes agent - place of supply of services - location of supplier of service - intra-state supply - liability to be registeredGeneral power of attorney - supplier - supplier includes agent - liability to be registered - Whether the owner-applicant is liable to be registered in Karnataka under KGST/CGST Act 2017 - HELD THAT: - The Authority found that the owner executed a registered General Power of Attorney appointing his mother to manage the property, induce tenants, execute tenancy deeds and receive rents. Under the statutory definition, a 'supplier' includes an agent acting on behalf of the supplier. The acts performed by the GPA holder in leasing out the property and receiving rents bind the principal and amount to supply of services by the agent. Since the GPA holder, a resident of Bengaluru, is the supplier making taxable supplies from Karnataka, she is liable to obtain registration in the State under the registration threshold provisions. [Paras 15, 16]The GPA holder, Smt. Prabhavathi, is the supplier of the renting service and is liable to be registered in Karnataka under the KGST/CGST Acts.Renting of immovable property - place of supply of services - location of supplier of service - intra-state supply - Whether tax is payable on renting of the commercial building and who is liable to pay - HELD THAT: - The Authority held that leasing or letting out of a building is a supply of services. For services directly related to immovable property, the place of supply is the location of the immovable property. As both the place of supply (the Bengaluru property) and the supplier (the GPA holder resident in Bengaluru) are in Karnataka, the supply is intra-state. Consequently, the supplier located in Karnataka is liable to discharge GST on the renting of the commercial building as per the applicable notifications and rate entries. [Paras 15, 17]The GPA holder, Smt. Prabhavathi, is required to pay tax on the renting of the commercial building.Final Conclusion: The Advance Ruling holds that the General Power of Attorney holder, Smt. Prabhavathi, is the supplier of the renting service, must register in Karnataka under the KGST/CGST Acts, and is liable to pay GST on the renting of the commercial building. 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.