QUESTION

ABC registered in Maharashtra has received a works contract (Interior work) for commercial shop in Haryana (Faridabad) Material delivery Address - Haryana (Faridabad). Should ABC take registration in that state? What if they do not register in that state and do the billing from Maharashtra?

ANSWER

FACTS OF THE CASE:

Taxable person is registered in Maharashtra providing works contract service in Haryana.

LAW APPLICABLE:

1. Place of supply as per clause (a) of section 12(3) IGST is specified as below

" The place of supply of services,

(a) 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 or boat or vessel, as the case may be, is located or intended to be located. "

2. Location of supplier of service has been defined under section 2(71) CGST as follows

" 'location of the supplier of services means,

(a) where a supply is made from a place of business for which the registration has been obtained, the location of such place of business;

(b) 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;

(c) where a 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 provisions of the supply; and

(d) in absence of such places, the location of the usual place of residence of the supplier;"

3. Section 22(1) CGST dictates that;

" Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees "

INTERPRETATION:

Place of supply in case of works contract is decided as per clause (a) of section 12(3) IGST and in the current case, this is in the state of Haryana. However, it is imperative to note here that Place of Supply is considered only for the purpose of levying the tax as integrated tax or central + state tax.
Registration under section 22 is required in the state from which taxable supply of goods/services is made. Registration therefore is not dependent on the place of supply of goods/service.
In the current case as per clause (a) of section 2(71) CGST, the location of supplier of services is Maharashtra, i.e the state where the registration has been obtained.
Since the State from where the supply is made, i.e Maharashtra and the state in which Place of Supply is decided, i.e Haryana are different therefore the transaction would be subject to IGST.

CONCLUSION:

So, to answer your questions;

Question 1: Should we take registration in that state??
Registration in Haryana is not required.

Question 2: What if we do not register in that state and do the billing from maharashtra ??
Transaction would be subject to IGST.

Question 3: Kindly suggest the possible ways to go further with the type of contract we have received??
Please note that a specific query regarding the indirect tax laws can be answered. In case you need a legal solution to any query kindly raise that specific query to us.

Question 4: Explain with example as related to ITC which can be claimed by our customer?
As per clause (c) to section 17(5) the ITC on works contract is restricted to the extent the expense is capitalised in books, except where it is an input service for further supply of works contract service. (Reply dt. 06/04/2022)