GST: Inter-Branch Services Taxable, Says AAR

Services rendered by an employee of a branch office to the head office and vice versa would be subject to the goods and services tax, the Tamil Nadu Authority for Advance Ruling has held.

The central GST treats different registrations, even if they are of the same entity, as distinct persons, the AAR said while giving reasons for its decision.

The order of the Tamil Nadu AAR is in line with a ruling of the Maharashtra AAR and yet another ruling of the Karnataka AAR, where services rendered by head offices to their branches and group companies registered in different states were held as taxable under the GST.

The case before the Tamil Nadu AAR related to Profisolutions Pvt., which has its registered office in Karnataka. It has a branch office registered in Chennai and provides engineering and other such services for industrial and manufacturing projects. The branch offices also extend its services, such as engineering and accounting services, to the head office in Bengaluru.

According to the company, these services provided by the branch to its head office are not taxable as employees are appointed and work for the whole company rather than a branch office. They are paid as part of their employment and not as a service under the act.

The court disagreed, pointing out that under the GST, the supply of services even between related persons, as long as it's done in the course of business, would constitute a supply.

Such a supply of services, even within the same registered place of the company, shall be taxable as long as they are registered differently, the court said.