The authority for advance rulings (AAR), Mahashtra has ruled that services rendered to the head office of the World Economic Forum (WEF) by the liaison office (LO) in India are not liable for goods and services tax (GST) since the services are not for furtherance of its business.
WEF's liaison office is a public interest, not-for-profit organisation, established to assist the forum undertake fourth industrial revolution activities in India.
AAR holds that so long as the services imported by the LO from its head office are not used in the course of furtherance of business, it is not liable to pay GST on such transactions. The LO can take only specified activities, according to clearance given by the Reserve Bank of India (RBI) for its establishment.
Also, the applicant wouldn’t be required to obtain registration in India under the Central GST Act, AAR ruled.
Earlier AARs had given divergent rulings depending on the nature of the work of liaison offices.
"Therefore, one needs to understand the exact nature of activities undertaken in India and evaluate whether the LO qualifies as an intermediary, before finalizing the tax position," said Harpreet Singh, indirect tax partner at KPMG.
For instance, Maharashtra AAR in case of Dubai Chamber of Commerce and Industry had held that the LO of the chamber has to pay GST since it provides services of connecting business partners in Dubai with businesses in India for a consideration from the Dubai Head Office (HO). As such, it is an intermediary as defined under the Integrated GST Act, AAR had ruled.
On the other hand, the Karnataka Appellate AAR, in the matter of Fraunhofer-Gesellschaft Zur Forderung took a contrarian stand that activities of the LO located in Bengaluru do not amount to supply of services. It had set aside the AAR ruling that held that liaison activities amount to supply under the CGST Act and hence the LO is required to pay GST and undertake registration.
The Tamil Nadu AAR, in case of Takko Holding GmbH, had held that liaison activities undertaken by LO while acting as communication channel between parent company and Indian supplier of goods does not constitute ‘supply’ under GST law.
Abhishek Jain, tax partner at EY, said," The ruling provides requisite clarity on non levy of GST on such offices which are restricted to conduct any business activity under the regulations."
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