Gst on rent income

This query is : Resolved

Rajen (Querist)
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28 July 2017 Hi,

If we assume a scenario where company A (Tamilnadu) has given a property in Chennai on sub-lease to company B (Delhi) at agreed monthly rent.

Company A has GST Registration in Tamilnadu, whereas company B hasn't taken GST registration in Tamilnadu, but having GST registration at Delhi.

As the property is at Chennai, place of supply will have to be considered at Chennai. However, tenant is not having registration at that location.

Question:

(a) Whether company A should raise invoice with SGST / CGST considering company B as unregistered customer for Tamilnadu state?

(b) Whether company A can raise invoice with IGST using company B's registration at Delhi?

Please suggest.

Devansh Jain

Devansh Jain (Expert)
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28 July 2017 (a) Yes
(b) No
Reasons:
For deciding whether IGST or SGHST+CGST is to be charged, location of supplier & place of supply is to be seen.
If these 2 in same state, then CGST+SGST otherwise IGST.
In your case, location of supplier is TN and place of supply is also TN. Hence CGST+SGST will have to be charged in invoice.
Further, the Company A will have to raise invoice in name of company B and B will be able to take ITC of CGST only (because ITC of SGST one one state cannot be used to adjust liability of SGST of another state).

Possible tax plannings for benefit of Company B:
1. If B want to expand business to TN also, then it can get registered in TN and take ITC of TN-SGST to adjust from SGST liability.
2. or, B can take ISD (input servidce distributor) registration in TN and then transfer TN-SGST cITC as IGST to it's own Delhi office from where the IGST ITC will be avaible to adjusted from IGST liability.

Rajen

Rajen (Querist)
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28 July 2017 Thanks for the reply. Section 12 of IGST Act talks about place of supply... does CGST or SGST talk about place of supply as well? I was also of the same opinion as yours, but tenant is insisting to use IGST and raise invoice on their Delhi office, which doesn't seem to be compliant with the act.

Is there any clarity available in the act or any other reference material?

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Devansh Jain

Devansh Jain (Expert)
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28 July 2017 Yes CGST Act as well as SGST ACTs talk about the 'place of supply'.
In section 2(86), definitions, it means as defined under IGST Act only.
Hence there is ample clarity as well as sync between IGST, CGST and SGST Acts.
As far as the concern of your tenant is there (perhaps regarding ITC issue only) I have already shared some possible tax planning for the benefit of the tenant....