Services offered by the office of a company to its branches in other states will attract GST, the Karnataka bench of the Authority of Advance Rulings (AAR) has said, in what is seen as an adverse ruling for the industry.
This means that any service provided by a company’s human resource or finance department to branches in other cities will be treated as supply, and the company will have to pay Goods and Services Tax (GST) on that.
Although the tax could be claimed as an input credit by the location receiving the service, it might increase the compliance burden for companies.
After several rulings perceived to be against businesses and contradictory views on the same issue in different states, the industry is looking forward to a centralised national appellate tribunal, which was recently approved by the GST Council.
It will be based in Delhi, with three regional benches — in Chennai, Mumbai and Kolkata. The tribunal will have members from the judiciary as well as tax departments to hear appeals against the order of the appellate authority set up by states under the GST regime.
On the contrary, AARs in states comprise state and central GST officers, and not judicial members.
The Karnataka AAR case pertains to Columbia Asia hospitals, where the authority held that the employer-employee relationship in the corporate