Sec.12(3)(a) - Place of supply

[Nikhil Kamble]

Vendor registered in Maharashtra has engaged a man power supplier registered in Karnataka for further supply of manpower services which are ultimately used in construction of immovable property.

Vendor registered in Maharashtra is of view that supply should be interstate but manpower supplier is of view that supply should be intrastate.

Does manpower service will fall under section 12(3) (a) of IGST Act

[KASTURI SETHI]

Q. Does manpower service will fall under section 12(3)(a) of IGST Act ?

Ans. No. It is inter-state supply. Covered under Section 12(2)(a) of IGST Act. IGST is applicable.

[Raam Srinivasan Swaminathan Kalpathi]

Supply as rightly pointed out by the respected expert is Inter-State. ICAI background material emphasizes that "a mere connection with an immovable property is not sufficient; the service must be directly in relation to the immovable property for Section 12(3)(a) to apply". If the contract is for only a general manpower supply where labour is supplied to the recipient, who controls and deploys them, and the service is not regarded as directly in relation to the immovable property), then the default place of supply under Section 12(2) may become relevant.

[Sadanand Bulbule]

I welcome the replies.

[Kashish Gupta]

Section 12(3)(a) of the IGST Act provides that the place of supply of services directly in relation to an immovable property, including services provided by architects, interior decorators, surveyors, engineers and other related experts or estate agents, shall be the location of the immovable property.

The key question here is whether manpower supply services fall within the ambit of Section 12(3)(a) as services "directly in relation to immovable property".

The answer is no. Manpower supply is not a service directly in relation to immovable property. It is a service of deploying human resources. The fact that the manpower so supplied is ultimately used by the vendor in construction of an immovable property does not make the manpower supply service itself a service directly in relation to immovable property. The nexus between the manpower supply and the immovable property is indirect. What is direct is the relationship between the manpower supplier and the vendor, which is a service of providing workforce.

The place of supply in the present case will therefore be determined under the general rule under Section 12(2) of the IGST Act, which provides that the place of supply of services, other than those specified in sub-sections (3) to (14), made to a registered person shall be the location of such registered person. Since the vendor receiving the manpower service is registered in Maharashtra, the place of supply will be Maharashtra. The manpower supplier registered in Karnataka will therefore be making an interstate supply, and IGST will be applicable. The view of the manpower supplier that it is an intrastate supply is incorrect.

[Shilpi Jain]

If the location of the recipient and the Immovable property is the same State, then it does not make a difference whether IGST / CGST & SGST is charged. Otherwise my view is it is not a immovable property specific services and PoS should be location of the recipient

AI Summary

Manpower supply and place of supply under GST: indirect use in construction does not attract the immovable property rule.
Manpower supply used in construction of immovable property is not a service directly in relation to immovable property under section 12(3)(a) of the IGST Act. The service is a supply of workforce to the recipient, and the connection with the immovable property is only indirect. Therefore, the general place of supply rule under section 12(2) applies for services supplied to a registered person, making the place of supply the location of the recipient.