Companies bind GST on inter-state office services

MUMBAI: Companies are in trouble after the Authority of Advance Ruling (AAR), Karnataka, said that the activities at the head office, such as personnel, IT maintenance and accounting, would be treated as a service by the company. office to other units in different states and would attract GST.

The ruling has expressed concern about how to deal with salaries of stewardship positions such as chief executive, chief financial officer, audit head, legal head and marketing teams. According to the ruling, the salaries of these stewards must be forwarded and GST must be paid.

"Companies also need to analyze whether the cost of assets (such as depreciation, etc.) that are used at the HO (head office) should also be passed on to branches and GST are paid on this," said Abhishek Jain, tax partner, EY. The AAR ruling came in a recent case from M / s Columbia Asia Hospitals Private Limited.

The big question that arises here is whether these are actually services from the head office to units in other states or inherent basic stewardship functions of a legal person.

The AAR has ruled that there is an employer-employee relationship for the employees who are established at the head office, but according to the tax legislation, the other locations are separate persons. This is why employees in the head office do not have an employer-employee relationship with other offices in other states.

Therefore, the activities of the company's employees for other locations would be treated as & # 39; delivery & # 39; according to the GST legislation. Experts said that the AAR could be appealed and that the decision did not create a precedent for another company. "It could certainly lead to questions raised by officers of the audit wing or anti-fraud wings," said Waman Parkhi, partner tax, KPMG.

However, if the tax authorities follow their position, various complications may arise.

The C-level executives who manage the entire business, regardless of where they are located, may need to divide their time and effort across the different locations.

"Determining the value of central functions such as IT, management, HR, etc. would cause major problems, resulting in unnecessary complications for the company and the government receives no additional income (except for sectors exempt from GST) "Said Parkhi.

Source link

Leave a Reply