Mandatory GST registration vs Inter state supply of rental service

In this short article, I am discussing interplay of mandatory GST registration u/s 24 vis-a-vis inter state supply of rental service on immovable property based on place of supply (POS) rules in GST.

Background

Place of supply in case of rental service in relation to an immovable property is location of property. POS provisions are relevant for the purpose of determining whether a supply is intra or inter. if location of supplier (LOS) and place of supply (POS) are in same state the supply is an intra state one and accordingly CGST and SGST will be charged. However if the LOS and POS are in two different states then supply will constitute an inter state supply and accordingly IGST will be levied.

In this regard, it is pertinent to mention the provisions of section 24 which starts with an overriding effect on sub section (1) of section 22 which means that irrespective of turnover, in certain cases specified therein mandatory registration under GST is prescribed. One such condition is when a supplier makes inter state taxable supply of goods and services, meaning thereby that if a person makes inter state taxable supply of goods or services, he is liable for mandatory registration under GST irrespective of his turnover.

Case discussion

In the light of the above provisions, let us consider a situation where Mr X is having 3 commercial properties located in the states of MP, UP and Bihar. Mr X is an unregistered person located at Jaipur Rajasthan and does not have an other taxable supplies of goods/services apart from receipt of rental on these commercial properties and the aggregate turnover from all the three commercial properties taken together does not exceed Rs 20 lakhs. now the question arises that whether Mr X is required to take up mandatory registration in GST even though he does not cross the threshold limit of Rs. 20 lakhs in view of section 24 on the ground that he has made inter state supply of rental services ?

The answer is no, Notification no 10/2017 IGST dated 13.10.2017 exempts supplier of taxable inter state services where aggregate turnover on all India basis does not exceed Rs 20 Lakhs. So where a supplier supplies inter state services and his aggregate turnover under his pan on all India basis is below Rs. 20 Lakhs he is exempted from mandatory GST registration. 

This notification has been issued under section 23 which is an independent section from section 22 and section 24. Section 24 has overriding effect only on section 22 so far as it relates to threshold turnover limit and not over section 23 so notification issued to this effect has an independent effect over section 24.

So therefore in case discussed Mr X is not requiring GST registration even if he makes an inter state taxable supply of rental service so long as his turnover does not exceed Rs 20 Lakhs.