Place of supply in case of builder

[Rajesh Kumar]

sir/ madam,

A builder is registered in Haryana and Providing construction service in Delhi. As per GSTR-3B returns of Haryana, he is charging IGST, is it correct in the purview of place of supply ? Should he taken Registration in Delhi for the construction in Delhi ?

If its a wrong practice, then what will be the effect on ITC which availed against the invoices used in Delhi ? What will be effect of tax paid by him in the head of IGST ?

[ABHISHEK TRIPATHI]

Dear Rakesh Ji,

I don’t think separate registration is required. You may refer, In re M/s T & D Electricals (AAR Karnataka) - 2020 (4) TMI 693 - AUTHORITY FOR ADVANCE RULING, KARNATAKA more or less applicable to your case.

The interpretation is required for “supplier of service will have to register at the location from where he is supplying services”. In your case, you are supplying services from Haryana, but the government might contest that the services are being supplied from Delhi. In my view, it is Haryana hence, IGST. But everything has to be looked into, how are you buying goods in Delhi? what are the arrangements? Etc etc.

[KASTURI SETHI]

Sh.Rajesh Kumar Ji,

The practice adopted by the builder is correct. The decision dated 31.3.2020 of AAR Karnataka in respect of applicant T & D Electricals - 2020 (4) TMI 693 - AUTHORITY FOR ADVANCE RULING, KARNATAKA throws light on all the issues involved in this scenario.

[Rajagopalan Ranganathan]

Sir,

In my opinion, the decision given by AAR, Karnataka is a decision in personam and not in rem. You may apply to the AAR of Rajasthan and obtain a separate ruling in your favour. However AAR, Rajasthan is bound by the decision of AAR, Karnataka. They may give a different ruling.

[KASTURI SETHI]

Any decision of AAR is binding only on the applicant. For others, AAR decision has persuasive value and not precedential value. In case the facts & circumstances are similar for the querist, the querist will have to apply for Advance Ruling as opined by Sh.Ranganathan, Sir.

[Shilpi Jain]

If there is no fixed establishment in Delhi then no requirement to take registration

[Amit Agrawal]

For my views, it is my understanding that said builder (though registered at Haryana) is having land in Delhi. He is constructing building on such land and then, selling under-constructed property (i.e. in the building under construction) to multiple buyers.

Without going into requirement of separate registration at Delhi or not, I want to explain why I hold a view that builder must take separate registration at Delhi. And my reasons are as follows:

A. Said builder must be availing various services such as 'architect, painting, plastering, civil work, works contract services and so on' from third party vendors for constructing the building on land located in Delhi. (This is general practice/s of builder-industry I noticed).

B. In terms of Section 12 (3) of the IGST Act, 2017, 'Place of Supply' of all such received will be 'Delhi' even if location of service-recipient is located at Haryana.

C. Input-Tax-Credit of gst charged by those vendors will not be available at builder's Haryana registration (i.e. at-least gst portal will not allow it). And for this view, I am not going into legal correctness or otherwise of the portal-restrictions in this regard.

D. To avoid such loss of ITC, it is in business interest of builder to take separate registration at Delhi.

E. Non-taking registration at Delhi will always be risky for builder as 'Delhi Tax Dept' got decent grounds to hold a view that that registration at Delhi is compulsory specially when land is owned by builder, when he is selling under-constructed premises on such land and considering generally known business-model of any such builder. And Delhi Tax Dept. indeed notice and take such stand, this can lead to multiple complications threatening continuity of ongoing operations carried at Delhi site as well as huge tax controversies / litigation on multiple grounds.

E1. Even taking favorable advance ruling from Haryana will not help considering wordings of section 103 (b) of the CGST Act, 2017. If any really wants, one should take such ruling from Delhi advance ruling authority. And experiences tell me that builder is unlikely to get favorable ruling on this issue from Delhi advance ruling authority.

(Kindly treat these as strictly personal views of mine and not as a profession opinion or advice).

[Amit Agrawal]

*Please read second Para above as follows:

Without going into statutory requirement of separate registration at Delhi or not, I want to explain why builder must take separate registration at Delhi. And my reasons are as follows:

[Rajesh Kumar]

@Shilpi Jain

If there is no fixed establishment in Delhi then no requirement to take registration

Ma'am construction site is itself a fixed establishment. In my view builder can't take benefit of bill to ship to model.

Please explain whether ITC availed on Delhi site is available to Haryana Registration.

[Shilpi Jain]

Agree with Mr. Rajesh...

Nature of construction not mentioned. So In case if construction site is a fixed establishment then registration to be taken. I just wanted to highlight that of there is a fixed establishment then registration required. I did not conclude that in this case registration not required.

[Shilpi Jain]

A very detailed reply given by Mr. Amit on why registration should be taken.

AI Summary

Debate on Builder's IGST Charging Practice: Is Delhi Registration Necessary for Compliance with Place of Supply Rules? A builder registered in Haryana provides construction services in Delhi and charges IGST according to Haryana's GSTR-3B returns. The discussion revolves around whether this practice is correct concerning the place of supply rules and if the builder should register in Delhi. Some participants argue that separate registration in Delhi is not required, citing an AAR Karnataka ruling. Others suggest that due to the nature of services and location, separate registration in Delhi is advisable to avoid complications with Input Tax Credit (ITC) and potential disputes with the Delhi Tax Department. The consensus leans towards the necessity of Delhi registration to safeguard business interests and compliance.