EXAMPLE

ABC & Co., newly set up an architectural firm based in Faridabad and provided  professional services to  his first client of Faridabad regarding his newly purchased land in Delhi for construction of Office on a consideration of Rs. 2 lakh.  ABC & Co. did not take registration as his turnover is below threshold turnover limit of Rs. 20 lakh), hence, did not collect GST on bill of Rs. 2 lakh.  Determine whether the transaction of ABC & Co. is legally correct and in accordance with the provision of GST.

ANSWER

Section 24 of CGST Act specifies the persons who are compulsorily liable for registration even when their turnover is below the threshold limit of 20 lakh /10 lakh. Inter-state supplier is one of them.

Location of supplier and the place of supply are the determinant factors to decide whether the supply made by the supplier in this example is intra-state supply or inter-state.  

According to section (12) subsection (3) of IGST Act, when the services directly relate 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, place of supply shall be the location at which the immovable property is located or intended to be located. Accordingly, the place of supply is Delhi in this example and supplier is located in Haryana..   

The supply which has taken place according to this example is clearly inter-state as the supplier and place of supply lie in different states.  

Hence ABC & Co. is liable for compulsorily registration as he is making an inter-state supply.  

As per definition  u/s 2(107), taxable person means person who is registered or liable to registered under section 22 or section 24. Thus a inter state supplier is taxable person under GST irrespective of threshold limit of 20/10 lakh. Accordingly, u/s 31 every registered person shall issue taxable invoice. Thus, ABC & Co.  shall be charged IGST on the consideration of Rs.2 lakh.

The above solution will undergo change if the said transaction take place on or after 13.10.2017,the solution is as follows:

As per Notification No. 10/2017-Integrated tax,a person making interstate supply of services  not exceeding an amount of twenty lakh rupees in a financial year is exempted from obtaining registration under the act.So in the above case the transaction of ABC ltd. is legally correct if the transaction take place on or after 13.10.2017.