By Order No. KAR ADRG 17/2023 dated April 13, 2023, the Karnataka Authority of Advance Rulings (KAAR) determined that the activity of leasing or letting out a building, including a commercial, industrial, or residential complex for business or commerce, either wholly or in part, is a supply of services under entry 2(b) of Schedule II to Section 7 of the CGST Act, 2017 by a General Power of Attorney.
In this instance, the petitioner is a non-resident who owns real estate in India that is rented to tenants. The applicant has given his mother the GPA to establish tenancy, to execute the necessary deeds or documents, to register before the jurisdictional sub-registrar, to receive all profits, rents, lease advance funds, and advance security deposit amounts from both the current tenant and the prospective tenant, and to handle all necessary actions regarding tenancy of the said scheduled property. Additionally, the GPA holder receives and keeps all rental income from the property.
The applicant claimed that because he is the owner and supplier of the renting of immovable property service, the supplier’s location is outside of India due to his place of residence outside the country and the lack of a fixed establishment there, and the service he is currently offering is therefore an import of service because it satisfies the requirement. Furthermore, the service recipient is responsible for paying the tax through the reverse charge method, so he is neither required to register under the GST nor responsible for doing so.
According to the KAAR’s analysis of the relevant facts, “the activity of leasing or letting out 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.” Additionally, according to Section 2(105) of the CGST Act of 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 with respect to the goods or services or both supplied.” Therefore, the provider of the service of leasing the building for business purposes in this situation is the GPA holder, who also happens to be the applicant’s mother.
The KAAR ruled that because the immovable property and supplier, the GPA holder, are both located in the State of Karnataka and are taxable persons, the supply in the current instance qualifies as an intra-state supply under section 8(2) of the IGST Act, 2017. On the taxable value, the GPA holder would be responsible for paying CGST and KGST.
