The Karnataka Authority of Advance Rulings (KAAR) in the case of M/s. Nagabhushana Narayana, (Through Prabhavathi, GPA Holder) vide Order No. No.- KAR ADRG 17/2023 dated 13.04.2023, held that the activity of leasing or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services in terms of entry 2(b) of Schedule II to Section 7 of CGST Act, 2017 by a General Power of Attorney (GPA) holder shall be supplier of service and liable to be registered under GST Law.
In this case, the applicant being a non-resident, owns an immovable property in India, the same is rented out to the tenants. The applicant has given the GPA to his mother for inducting tenant, to create tenancy and to execute necessary deeds or documents either registering before the Jurisdictional sub-registrar and to receive all profits, rents, lease advance money, advance security deposit amount from the existing tenant and also from the prospective tenant and to take care all necessary action regarding tenancy of the said scheduled property. Also, the incomes from the property, including the rent are received and retained by the GPA holder.
The Applicant submitted that he being the owner and supplier of renting of immovable property service, the location of the supplier is outside India as he resides outside India and also he doesn't have any fixed establishment in India; the service being provided by him becomes import of service as it satisfies the requirement. Further, the responsibility to pay tax is on the service recipient under reverse charge mechanism and thus he is neither liable for registration under GST nor liable to pay the tax.
The KAAR observed the facts and stated that “the activity of leasing or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services in terms of entry 2(b) of Schedule II to Section 7 of CGST Act, 2017.” Further in terms of Section 2(105) of CGST Act, 2017 “‘supplier' in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied”. Thus, GPA holder i.e. the mother of applicant in this case is the supplier of service of leasing of the building for commercial purposes.
The KAAR held that in the instant case the supply amounts to intra-state supply in terms of section 8(2) of the IGST Act, 2017, since the location of immovable property and location of supplier i.e. GPA holder being a taxable person are both in the State of Karnataka. The GPA holder would be liable to pay CGST and KGST on the taxable value.
