We in this article will understand the applicable provisions of Goods and Service Tax (GST) with easy examples, if one rents out immovable property.

(A) Applicable GST provisions

To understand the issue, we need to go through the applicable GST provisions in force that are:

Section 22 of CGST Act 2017 “Persons liable for registration”

(1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees:

Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees.

Section 12(3) in IGST Act 2017

(3) “The place of supply of services”-

(a) directly in relation to an immovable property, including services provided by architects, interior decorators, surveyors, engineers and other related experts or estate agents, any service provided by way of grant of rights to use immovable property or for carrying out or co-ordination of construction work;

(b) by way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by whatever name called, and including a house boat or any other vessel; or

(c) by way of accommodation in any immovable property for organising any marriage or reception or matters related thereto, official, social, cultural, religious or business function including services provided in relation to such function at such property; or

(d) any services ancillary to the services referred to in clauses (a), (b) and (c), shall be the location at which the immovable property or boat or vessel, as the case may be, is located or intended to be located:

Provided that if the location of the immovable property or boat or vessel is located or intended to be located outside India, the place of supply shall be the location of the recipient.

Explanation. – Where the immovable property or boat or vessel is located in more than one State or Union territory, the supply of services shall be treated as made in each of the respective States or Union territories, in proportion to the value for services separately collected or determined in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed.

Section 7 of The IGST Act 2017 ” Inter-State supply”

(3) Subject to the provisions of section 12, supply of services, where the location of the supplier and the place of supply are in–

(a) two different States;

(b) two different Union territories; or

(c) a State and a Union territory,shall be treated as a supply of services in the course of inter-State trade or commerce.

(B) Practical examples to Check Place of Supply for Charging CGST, SGST or IGST:

Practical Problem 1: Landlord registration and property location in different State

• Taxpayer registered in Delhi
• Rented property in Uttarakhand
• Tenant registered in Uttarakhand
• Place of supply shall be Uttarakhand
• Tax chargeability shall be IGST
• In the above case the taxpayer is not required to be registered in Uttarakhand too.

Practical Problem 2: Landlord registration, property location and tenant registration in same State

• Taxpayer registered in Uttarakhand
• Rented property in Uttarakhand
• Tenant registered in Uttarakhand
• Place of supply shall be Uttarakhand
• Tax chargeability shall be CGST and SGST

Practical Problem 3: Landlord registration and property in same State but tenant in other State

• Taxpayer registered in Uttarakhand
• Rented property in Uttarakhand
• Tenant registered in Delhi
• Place of supply shall be Uttarakhand
• Tax chargeability shall be CGST and SGST

(C) To sum up what provisions say-

• Place of registration: As per Section 22(1) of the CGST Act, registration is required from where taxable supply is made, i.e., the place where the business is ordinarily carried on, i.e., the registered office or place of decision-making.
• Place of Supply for renting immovable property: As per Section 12(3) of the IGST Act, is the location of the property.
• Chargeability of Tax: When the place of supply and location of property differ, IGST is to be charged, as per Section 7(3) of the IGST Act, 2017.

(D) Points to remember

• The landlord can be registered in a state different from the state in which the property is situated. It is at the option of landlord to get itself registered in which State. The chargeability depends upon the place of supply whether CGST and SGST is applicable or IGST.
• No mandatory requirement to obtain registration in the state where the immovable property is located.
• GST registration in every state where immovable properties are rented is not legally required. Charging IGST from the state of registration suffices