Branch office employees providing services to HO subject to GST

The AAR has made an argument that if employees are deployed from one registered place of business to another registered premise of the same company, then GST will apply to their services.


The issue of whether GST should be applied to salaries paid to employees in a branch office who provide services to the head office, or vice versa, has recently been the subject of debate. The Tamil Nadu advance ruling authority has ruled that services provided by common employees in a branch office to the head office are liable to GST.

It is important to note that each branch of a company must be registered separately in its respective state. This ruling came about in response to an advance ruling application from the Chennai branch of Profit Solutions, a firm headquartered in Bengaluru.

The current ruling that brings common employees’ services within the purview of GST is based on a flawed legal premise, as the relationship between employers and employees lies outside the ambit of GST. The lack of a prescribed methodology for valuing such services is already a challenge, and the new ruling could result in further litigation if authorities begin demanding GST on employee costs. 

This decision could also complicate the ongoing debate about whether a supply of service exists between the head office and branch offices, as well as the associated valuation. Companies may face difficulties in identifying common human resources and providing intra-entity services through them, potentially resulting in a fresh round of litigation regarding services from branch offices to the head office.

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