While upholding a ruling by Karnata Authority of Advance Ruling, the Appellate Authority of Advance Ruling ( AAAR ) has confirmed the GST on Salary Paid for Services by Firm to its Branch Offices in Other States.
The appellant, a private limited company engaged in providing health care services categorizing them as In-patient (IP) and Out-patient (OP) services. The appeal regarding the tax liability on the activities performed by the employees at the corporate office in the course of or in relation to employment such as accounting, other administrative and IT system maintenance for the units located in the other states.
The AAR had held that the salary for services like accounting, IT, human resource, provided by the head office of a company to its branch offices in other states will attract 18 per cent tax under the present Goods and Services Tax (GST) regime.
The Appellant has placed reliance on a few CESTAT decisions (cited supra) to buttress their case. Wd has gone through all case laws relied upon and hold that the said decisions will not be. applicable to the matter at hand since they were rendered in the context of the Service Tax law. The taxable event under the Service Tax law and under GST are vastly different and hence the ratio of decisions rendered in the light of the taxable event under Service Tax provisions cannot be applied to the transactions under GST regime. As such the case laws relied upon by the Appellant are not of any assistance to this case.
While ruling in favour of department, AAAR said that, “The India Management Office (IMO) of the Appellant is providing a service to its other distinct units by way of carrying out activities such as accounting, administrative work, etc with the use of the services of the employees working in the IMO, the outcome of which benefits all the other units and such activity is to be treated as a taxable supply in terms of the entry 2 of Schedule I read with Section 7 of the CGST Act”.
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