No GST on Salary Expenses Accounted to meet Indian Accounting Requirements: AAR [Read Order]

The Maharashtra Authority of Advance Ruling (AAR) ruled that Goods and Service Tax (GST) is not applicable to salary expenses accounted to meet Indian accounting requirements.

The applicant, Hitachi Power Europe GmbH is a Company incorporated under the Laws of Germany has been awarded contracts for the supply of goods and supervisory services by M/s. BGR Boilers Private Limited (BGRB) in relation to Projects of M/s. NTPC Limited, M/s. Meja Urja Nigam Private Limited end M/s. Damodar Valley Corporation being Mega power projects, located in Maharashtra, Uttar Pradesh, and West Bengal respectively.

The applicant sought the advance ruling on the issue of whether the Goods and Services Tax is applicable to the accounting entry made for the purpose of Indian accounting requirements in the books of accounts of Project Office for salary cost of Expat employees.

The Authority consists of members A.A. Chahure and P. Vinitha Sekhar ruled that Goods and Service Tax (GST) is not applicable on salary expenses accounted to meet Indian accounting requirements.

“For GST to be applicable to the accounting entry made for the purpose of Indian accounting requirements in the books of accounts of Project Office for salary cost of Expat employees paid by the Head Office, such accounting entry should be seen as a supply of goods, services or both. Since we find that there is a relation of employer and employee between the Project Office and the ex-pat employees, the provisions of Schedule III of the CGST Act comes into play in this case as per which services by an employee to the employer in the course of or in relation to his employment will not be considered as a supply and therefore will not attract GST,” the AAR observed.