Services Provided By Branch Office To Head Office And Vice Versa Will Attract GST: AAR

The Tamil Nadu Authority for Advance Ruling (AAR) has held that the services, including those of common employees of a person, provided by branch offices to the head office and vice versa, each having a separate GST registration, will attract GST.

The bench of R. Gopalsamy and N. Usha has observed that even the services of employees deployed from a registered place of business to another registered premises of the same person will attract GST, as the employees are treated as related persons in terms of explanation to Section 15 and treated as supplies by virtue of Schedule I (2) to the CGST Act, 2017.

The applicant/assessee registered under the Companies Act 2013 in the state of Karnataka has a branch office in Chennai, and the branch office is registered in the state of Tamil Nadu under the GST Act for providing engineering services for industrial and manufacturing projects.

The branch office of the applicant is providing support services like engineering services, design services, accounting services, etc. to the head office in Bangalore and is also registered in the state of Karnataka under the GST Act.

The applicant sought an advance ruling on the issue of whether providing service from a branch office in one state to the head office in another state through employees who are common to the company constitutes a supply of service in terms of Section 7 of the Act and, if so, whether such services attract GST liability.

The applicant stated that the employees are appointed and working for the company as a whole and not employed for the head office or branch specifically, while recognizing the legal position that the head office and branch office are distinct persons under GST. It is obvious that the service of an employee working in a branch flows only through the branch to the head office or customer. As long as the employee is deployed in a branch of an entity, his services that are rendered directly to the head office will be in his representative capacity as an employee of the branch.

The AAR noted that Schedule I (2) to the CGST Act, 2017 states that ‘supply of goods or services or both between related persons or between distinct persons, as specified in Section 25, when made in the course or furtherance of business, is to be treated as a supply even if made without consideration.

Applicant’s Name: Tvl.Profisolutions Private Limited

Date: 31/03/2023

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