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The Authority for Advance Ruling (AAR) has recently ruled that employee services provided from a branch office to the head office, and vice versa, are liable to attract 18% GST. This ruling was given in response to a query by a taxpayer seeking clarification on the GST liability of such services.
The AAR observed that the services provided by the employees of a branch office to the head office, or vice versa, are not in the nature of "employee-employer" relationship, but rather in the nature of "inter-branch transactions". These transactions are considered as "supply of services" under the GST law, and are therefore liable to attract GST.
The AAR further observed that such services are not covered under the scope of "exempted services" under the GST law. This means that the taxpayer cannot claim any exemption from GST liability for such services, and will be required to pay GST at the rate of 18%.
The ruling has important implications for businesses that operate through multiple branches or offices. Such businesses will now be required to account for GST on employee services provided between their various branches or offices. This may have an impact on the cost structure of the business, and may also require changes to the existing accounting and invoicing systems.
It is important for taxpayers to note that the AAR ruling is binding only on the taxpayer who sought the ruling, and only for the specific transaction and set of circumstances that were presented in the ruling request. However, the ruling may be used as a reference by other taxpayers who may have similar transactions or circumstances.
In conclusion, the recent AAR ruling highlights the need for businesses to carefully assess the GST implications of transactions involving employee services provided between their various branches or offices. Businesses should seek professional advice and guidance to ensure that they comply with the GST law and avoid any potential liabilities or penalties.
For any further doubt on matters related to GST, feel free to contact ASC Group.
Source: Economic Times
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