Order Date – 13 April 2023

Facts – 

• The Applicant, Sri. Nagabhushana Narayana through Smt G Prabhavathi (GPA holder), a non-resident Indian, holding an OCI card and residing at California, United States of America (USA), owns an immovable property at Bangalore, India and rented the same to the tenants.

Issue - 

• Whether the Applicant is liable to be registered under KGST/CGST Act 2017? Whether applicant is required to pay tax on renting of commercial building?

Order – 

• The AAR observed that in the instant case, vide GPA registered on 22.05.2022, Shri Nagabhushana Narayana, a non-resident Indian, who is the absolute owner of the scheduled property, due to reasons of being working out of country, has appointed his mother Smt Prabhavathi, resident of Bengaluru, to manage the property. In pursuance of the provisions of GPA, Smt Prabhavathi has created tenancy and inducted various tenants by way of leasing out the scheduled property for commercial purposes.
• It is evident that though Shri Nagabhushana Narayana, is the absolute owner of property, the act of leasing of immoveable property was taken up by Smt Prabhavathi as a GPA holder of the said property. Also the income from the property, including the rent are received and retained by the GPA holder.
• In terms of Section 2(105) of CGST Act, 2017, Smt.Prabhavathi, the GPA holder is the supplier of service of leasing of the building for commercial purposes. Since Smt Prabhavathi is a resident of Bengaluru, Karnataka and a supplier of taxable service, is liable to take registration under Section 22(1) of the CYST Act, 2017.
• In the instant case, since the supply of service is directly in relation to immoveable property, in terms of Section 12(3) of IGST Act, 2017, the place of supply of service shall be the location of the said immoveable property i.e., in Bangalore, Karnataka. Since the place of supply and location of supplier are both in Karnataka the said supply amounts to intra-state supply in terms of section 8(2) of IGST Act, 2017 and the taxable person, i.e Smt. Prabhavathi is liable to pay CGST and KG ST of 9% each on the taxable value in terms of entry no 16(iii) (SAC heading 9972) of Notification No. 11/2017 dated 28.06.2017, as amended.