No IGST Payable on Head Office Services Not Cross-Charged to Branches When Full ITC is Available: Delhi HC [Read Order]
The Delhi High Court ruled that no IGST is payable on services from the Head Office to the Branch Offices when no cross-charging is done and full ITC is available.
![No IGST Payable on Head Office Services Not Cross-Charged to Branches When Full ITC is Available: Delhi HC [Read Order]](https://images.taxscan.in/h-upload/2025/06/05/2041411-delhi-high-court-gst-itc-input-tax-credit-taxscan.webp "No IGST Payable on Head Office Services Not Cross-Charged to Branches When Full ITC is Available: Delhi HC [Read Order]")
In a recent decision, the Delhi High Court held that Integrated Goods and Services Tax (IGST) is not payable on services provided by the Head Office (HO) to its Branch Offices (BOs) when there is no cross-charging and the BOs are eligible for full input tax credit (ITC). The case arose when KEI Industries Limited filed a writ petition challenging an order-in-original dated...
In a recent decision, the Delhi High Court held that Integrated Goods and Services Tax (IGST) is not payable on services provided by the Head Office (HO) to its Branch Offices (BOs) when there is no cross-charging and the BOs are eligible for full input tax credit (ITC).
The case arose when KEI Industries Limited filed a writ petition challenging an order-in-original dated 31.01.2025 issued by the Additional Commissioner, Central GST, Delhi East. The tax department had raised a demand, stating that services between the HO and BOs, even if not cross-charged, were liable for IGST. The company argued that the order overlooked the clarification issued in CBIC Circular No. 199/11/2023-GST dated 17.07.2023.
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The petitioner’s counsel referred to the circular, which stated that when full ITC is available to the receiving branch, the value of services declared (even if Nil) shall be deemed to be the open market value under Rule 28 of the CGST Rules. In such cases, where no invoice is issued and no specific cost components like salary are added, the value can be deemed Nil, resulting in no tax liability.
They also relied on a recent judgment by the same court in Metal One Corporation India Pvt. Ltd. v. Union of India, where it was held that in the absence of invoices, the value of services must be treated as Nil, and no tax could be demanded. The Delhi High Court in that case had quashed both the show cause notice and the consequent order-in-original.
On the other hand, the tax department’s counsel argued that a similar case, Filatex India Ltd., had been directed to pursue the appellate route instead of filing a writ petition.
A division bench comprising Justice Prathiba M. Singh and Justice Rajneesh Kumar Gupta observed that in KEI’s case, the adjudicating authority had applied Rule 28 without giving due regard to the CBIC circular or the judgment in Metal One Corporation.
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The court held that the authority must reconsider the matter, granting a fresh hearing to the petitioner and applying the correct legal framework. The court explained that failure to follow binding circulars and precedent rendered the original order unsustainable. The writ petition was disposed of with liberty to the petitioner to pursue further remedies, if needed.
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