GST applicable on services by branch for head office of the same firm, ruled AAR

Whether you eat at a restaurant, buy a bag of chips or pay your monthly internet bills, GST is applicable on almost everything. Yet almost six years after it was rolled out, the goods and services tax meant to simplify taxation by rolling all levies into one, is deemed too complicated by Indian traders.

As Indians continue to figure out GST and navigate different rates, authorities have ruled that services provided by a branch office for its own head office will also be taxed.

What was the case all about?

• In a case involving Profisolutions' registered office in Karnataka and its Chennai branch, the Authority for Advance Ruling held that 18 per cent GST is applicable.

• Although firms don't need GST registration in different states where they have offices, AAR maintained that supply of services between two units of the same entity is taxable.

• The firm will have to pay GST whether the two registrations are in different states or within the same state.

Why pay GST for services within the firm?

• The applicant argued that since the employees are working for the firm directly and not separately for the concerned branch, their services within the organisation won't attract GST.

• But AAR ruled that services exchanged between two offices with separate GST registrations, even under the same PAN, are liable to the tax.

• Apart from firms providing services struggling with the complexities of cross-charging salaries under GST, the confederation of all India traders (CAIT) also called it one of the most complicated taxation systems.

• They urged the finance ministry to review it, and create a one nation one policy framework.