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CHARGEBILITY OF GST IN CASE OF PROVISION OF INTERIOR DECORATION SERVICES WITH RESPECT TO AN IMMOVABLE PROPERTY

October 6, 2017

Our valuable client is an interior decorator having registered office in Kolkata. He has been assigned with the interior work of a company located in Bihar. He has raised the following questions:

  1. Will he charge IGST or SGST/CGST?
  2. Will he have to take separate registration in Bihar?

Our Advice:

The above question will depend upon 2 factors – whether the transaction is an inter-state or intra-state supply of services.

This further depends on 2 factors:

  1. Location of the supplier
  2. Place of supply

If the location of the supplier and place of supply are in two different states, the transaction is an inter-state supply. If they are in the same state, then it is an intra-state supply.

Determination of place of supply

Prima facie, the service provided by our client is in relation to an immovable property located in Kolkata.

The law

As per law, the place of supply services, 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, shall be the location at which the immovable property is located or intended to be located.

The law simplified

  1. The expression ‘in relation to’ encompasses a wide range of services that have a proximate nexus with the immovable property.
  2. The provision lists these services – architects, interior decorators, surveyors, engineers and other related experts or estate agents, grant of rights to use immovable property or carrying out / coordination of construction work.
  3. As can be seen, this list is not exhaustive and therefore – ‘in relation to’ – test will continue to be applicable to identify the services that will have the location of the property as its place of supply.
  4. Also, the location of the supplier or recipient is irrelevant in such cases.
  5. Further, there are other services that have proximity to immovable property that are ‘by way of’ accommodation. Such services too have, as their place of supply, the location of such property. Such property may be a hotel, inn, guest house, home stay, club or campsite including houseboat. The use of such property may be accommodation or for organizing a function such as marriage.
  6. The end-use will not alter the applicability of this provision but the proximity of the property visà-vis the services.
  7. Services that are ancillary to such services would also be covered by this provision.

Conclusion in our client’s case

Our client is providing interior decorator services in relation to an immovable property in Bihar. Hence place of supply is Bihar.

Determination of Location of the supplier

The law

Section 2(15) specifies “location of supplier of services” in the following 4 clauses:

  1. Where a supply is made from a place of business for which registration has been obtained, the location of such place of business.
  2. Where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment.
  3. Where supply is made from more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the provision of the supply.
  4. In the absence of such places, the location of the usual place of residence of the supplier.

The law simplified

  1. In order to satisfy the condition mentioned in Clause (a) of Section 2(15), it is important to check whether the supplier is having place of business in Bihar (where the immovable property is located)

               Section 2(85) of The CGST Act, 2017 defines “place of business” to include –

  • a place from where the business is ordinarily carried on, and includes a warehouse, a  godown or any other place where a taxable person stores his goods, provides or receives goods services or both; or
  • a place where a taxable person maintains his books of account; or
  • a place where a taxable person is engaged in business through an agent, by whatever name called.
  1. In order to satisfy the condition mentioned in Clause (b) of Section 2(15), it is important to check whether the supplier is having fixed establishment in Bihar.

“fixed establishment” means a place (other than the registered place of business) which is characterised by a sufficient degree of permanence and suitable structure in terms of human and technical resources to supply services or to receive and use services for its own needs 

  1. It pertains to a supply of service from more than one establishment and thus has no application in our case.
  2. In the absence of such places, the location of the usual place of residence of the supplier, which is Kolkata.   

 Conclusion in our client’s case

The location of supplier in case of our client is Kolkata.

Final conclusion

  1. The supply of interior decorator services is an inter-state supply since the location of supplier ( in Kolkata) and the place of supply (in Bihar) are in two different states.
  2. IGST will be charged on the interior decorator services.
  3. There is no need to take separate registration in Bihar, unless you intend to open a branch of your Kolkata office. In case, it is a new branch, then GST registration is mandatory. But if you work on assignment basis in various states, with no fixed establishment in any of them, then no separate registration is required.

Illustration as given in ICAI Background material

An architect registered from Mumbai has his client registered in Mumbai. He provides designing services pertaining to a hotel being constructed in Delhi. POS would be Delhi as the location of immovable property is Delhi. IGST would be payable at Maharashtra.

Disclaimer - The information provided in this document is for general information only. It is based on the information available publicly and the advice received from various professional experts regarding the GST law. The user of this document should be aware that the interpretation or implications of relevant GST rules may change/vary depending upon circumstances applicable to the user.

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