Place of Supply of Services Related to Immovable Property

1. Introduction

When it comes to GST on services, the biggest challenge is figuring out “where” a service is supplied. For most services, the location of the supplier or the recipient decides it. But things change completely when the service is related to immovable property — like land, buildings, or construction.

Why?

Because immovable property is tied to a specific location — it doesn’t move, so GST law fixes its place of supply (PoS) where the property is located.

That’s why Section 12(3) of the Integrated Goods and Services Tax (IGST) Act, 2017) provides special rules for services directly or indirectly connected to immovable property.

Let’s understand this section in detail, with examples and the latest 2024–25 updates.

2. What Section 12(3) Says

The law states:

In simple terms —

👉 When a service is connected to land or a building, the place of supply is where that property is located (or will be located).

3. Why This Rule Exists

Immovable property can’t be moved, and the consumption of services happens at that site.

So, GST ensures that the State where the property exists gets the tax revenue — not where the service provider or client is located.

For example: If an architect in Delhi designs a villa in Goa, the service benefits Goa — hence, Goa is the place of supply.

4. Types of Services Covered

Section 12(3) covers any service directly or indirectly related to immovable property, including:

• Architectural and Interior Design services
• Engineering, surveying, and construction supervision
• Estate agents, brokers, and real estate consultants
• Renting, leasing, or granting rights to use land/building
• Construction or coordination of construction projects
• Hotel, lodging, and accommodation services
• Maintenance, renovation, or repair services for property

Basically, if a service depends on a particular physical location of land or building, it falls under this rule.

5. Key Principle – Location of Property Decides Everything

Unlike general rules (Section 12(2)), where we look at supplier or recipient, Section 12(3) focuses solely on where the property is located.

So even if:

• The supplier and recipient are in different States, and
• Payment happens elsewhere, the PoS = location of the property.

6. Examples from ICAI PDF and Practice

Let’s go through practical examples for better clarity.

Example 1 – Architect Designing a Building

An architect registered in Delhi designs a commercial complex located in Mumbai.

• Property located in Mumbai → PoS = Maharashtra
• Tax Type = IGST (since supplier in Delhi, PoS in Maharashtra)

Example 2 – Interior Decorator for a Resort

A designer in Bengaluru provides interior decoration services for a resort in Goa.

• Property located in Goa → PoS = Goa
• Tax Type = IGST

Even if the decorator never visits Goa physically and works remotely, since the service is in relation to a property in Goa, GST belongs there.

Example 3 – Renting of Office Space

XYZ Realty Ltd. (Kolkata) rents office space to a company in Hyderabad.

• Property located in Hyderabad → PoS = Telangana
• Tax Type = IGST

If both parties are in the same State as the property (say both in Hyderabad), then CGST + SGST apply.

Example 4 – Hotel Accommodation

Mr. A (from Delhi) books a hotel in Shimla (Himachal Pradesh) for a vacation.

• PoS = Shimla (where property located)
• Tax Type = CGST + SGST (since hotel and property in same State)

Even though the guest is from Delhi, GST is paid to Himachal Pradesh.

Example 5 – Property Management Consultancy

A firm in Chennai provides property management services for apartments located in Bengaluru.

• PoS = Bengaluru (property location)
• Tax Type = IGST

7. Services “Intended to be Located”

Section 12(3) also covers properties intended to be located — meaning services related to sites under construction or yet to exist.

Example:

A builder hires a consultant to plan a mall to be built in Ahmedabad.

• Even though the mall isn’t yet built, PoS = Ahmedabad (intended property location).

This ensures future projects are also linked to the correct State.

8. Services Not Covered Under Section 12(3)

Not all services that have a loose connection to property are covered. Only services directly related to property qualify.

Not covered examples:

• Legal services like property dispute representation (not directly tied to property itself)
• Advertising on hoardings (covered under advertisement rules)
• Financial advisory related to real estate (covered under Section 12(2))

9. Special Cases Explained

(a) Multiple Properties in Different States

If one service relates to properties located in more than one State, the supplier must:

• Divide the value of service proportionally among States, and
• Charge GST separately for each property location.

Example: A consulting firm provides valuation for properties in Delhi and Haryana. The invoice must split value for Delhi (CGST + SGST) and Haryana (IGST).

(b) Property Outside India

If the property is located outside India, but both supplier and recipient are in India:

• PoS = Location of recipient (as per proviso to Section 12(3))

Example: A Delhi architect designs a villa in Dubai for an Indian client (Mumbai). Since the property is outside India, PoS = Mumbai (recipient location) → CGST + SGST.

(c) Property Across Borders

If one property spans multiple States (like pipeline, bridge, or railway line), GST should be divided State-wise based on actual value or usage proportion.

10. Latest CBIC Clarifications (2024–25)

These updates strengthen compliance and prevent cross-State tax misreporting.

11. Compliance Tips

• Always mention property address and State on the invoice.
• If multiple properties, show value allocation per State.
• Use correct State code in e-invoicing (property State, not supplier’s).
• Keep supporting agreements and drawings showing link to property.
• For properties outside India, mention recipient’s location clearly.

12. Common Mistakes to Avoid

• Using client’s address instead of property location as PoS.
• Not dividing invoice value when multiple property locations exist.
• Charging IGST when both supplier and property are in the same State.
• Missing property details on invoice or e-way bill.

13. Comparison – Section 12(2) vs 12(3)

14. Case Studies

Case 1 – Engineering Consultancy

A Hyderabad engineering firm designs a sewage plant in Kerala.

• PoS = Kerala (property location)
• Tax Type = IGST

Case 2 – Maintenance Contract

A Mumbai-based firm maintains a mall located in Pune.

• PoS = Pune
• Tax = CGST + SGST (Maharashtra)

Case 3 – Resort Design for Foreign Property

A Delhi architect designs a resort in Sri Lanka for an Indian promoter in Delhi.

• Property outside India → PoS = Recipient location (Delhi)
• Tax = CGST + SGST

15. Simplified Summary Table

16. Impact on Real Estate & Allied Industries

Section 12(3) is particularly important for:

• Real estate developers
• Construction companies
• Property management firms
• Hotel & hospitality sector
• Architectural and engineering consultants

It ensures tax revenue benefits the State where the real asset exists.

17. Practical Checklist for Businesses

• Identify if the service directly relates to property.
• Capture property address and PIN code on invoice.
• Use correct GST registration if operating in multiple States.
• Split value if project spans across States.
• Keep all agreements and approvals as proof during audit.

18. Quick Recap

19. Key Takeaways

• For any service connected to land, building, or real estate → PoS = location of property.
• If property is outside India, PoS = recipient’s location.
• Always specify property address on invoices and records.
• GST must be charged in the State where property exists — even if service delivered remotely.
• For multi-State projects, divide invoice value accordingly.

20. Final Thoughts

Section 12(3) ensures GST remains location-true — meaning tax belongs to the State where property actually exists. It closes loopholes that might allow revenue loss when services are delivered remotely but consumed elsewhere.

For professionals in real estate, architecture, or hospitality, it’s one of the most crucial GST rules to follow.

So remember:

“If your service touches the land, your tax belongs to that land.”

Get the location right, get your GST right.

Also Read: Place of Supply of Services – General Rules (Section 12(2))