Place of Supply for Services Provided at Immovable Properties

An immovable property is an immovable object, an item of property that cannot be moved without destroying or altering it. The property is fixed to the earth, for example, a piece of land or a house.

In the current tax regime, taxable services provided in relation to an immovable property are subject to Service Tax.
Service Tax, being a Central levy, is applicable irrespective of whether the service is provided intrastate or to a different state.

In the GST regime, it is necessary to determine whether the supply made is intrastate or interstate to determine the tax applicable on the supply. This can be ascertained by determining the place of supply of the service.

In case of services supplied in relation to an immovable property, specific rules have been laid down for determining the place of supply. These rules override the general rules for determining the place of supply of services.

Place of supply of services provided in relation to an immovable property will be the location at which the immovable property is located or intended to be located.

There can be four scenarios for this:

1. Services provided directly in relation to an immovable property

This includes services provided by architects, interior decorators, surveyors, engineers, etc.

For example: Raj Hotels, registered in Shimla, Himachal Pradesh, is constructing a hotel in Dehradun, Uttarakhand. The interior decoration of the hotel is being done by Ravi Interiors, whose registered place of business is Dehradun, Uttarakhand.

For the supply of interior decoration service,

Location of supplier: Dehradun, Uttarakhand

Place of supply: Even though the recipient, Raj Hotels’ registered place of business is Shimla, Himachal Pradesh, the place of supply will be the location of the hotel, i.e Dehradun, Uttarakhand

This is an intrastate supply and the taxes applicable are CGST and SGST

2. Lodging in an immovable property

This includes accommodation provided by a hotel, inn, guest house, homestay, club, campsite, house boat, etc.

For example: Raj Hotels in Shimla, Himachal Pradesh, provides lodging to Mr. Tariq, a registered dealer in Jaipur, Rajasthan, for an official seminar.

Location of supplier: Shimla, Himachal Pradesh

Place of supply: Shimla, Himachal Pradesh.
This is an intrastate supply and the taxes applicable are CGST and SGST

3. Accommodation in an immovable property for organizing a function

This includes accommodation for organizing any official, social, cultural, religious or business function.

For example: Mukesh Automobiles Pvt Ltd, a registered dealer in Gurugram, Haryana, books the conference hall of Raj Hotels in Shimla, Himachal Pradesh, for 3 days for an official conference.

Location of supplier: Shimla, Himachal Pradesh

Place of supply: Shimla, Himachal Pradesh
This is an intrastate supply and the taxes applicable are CGST and SGST

4. Any services supplementary to the services mentioned above

For example: Mukesh Automobiles Pvt Ltd, along with booking the conference hall of Raj Hotels in Shimla, Himachal Pradesh, also orders food and beverages for his guests for an official conference.

Location of supplier: Shimla, Himachal Pradesh

Place of supply: Shimla, Himachal Pradesh
This is an intrastate supply and the taxes applicable are CGST and SGST

As discussed above, in the current regime, Service Tax is levied on services provided in relation to immovable properties. Since Service Tax is a Central levy, input credit on services received can be set-off against the liability on services provided, irrespective of the state to which it pertains.

Taking the above example, in the current regime, Mukesh Automobiles Pvt Ltd in Haryana can take input credit of the tax paid on hotel charges in Himachal Pradesh. However, in the GST era, place of supply of services provided in relation to immovable properties is the location of the immovable property. This implies that in these scenarios, the taxes applicable will be CGST and SGST.

Note that CGST and SGST credit of one state cannot be used to set-off the liability of another state.  In such a case, when a registered person takes the services of an immovable property in a different state, the person will not be able to take input credit on the service taken from another state. Hence, in the GST regime, Mukesh Automobiles Pvt Ltd, registered in Haryana, cannot take input credit of the CGST and SGST paid in Himachal Pradesh.

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