AAR Tamil Nadu – Applicability of GST on Supply of Services between Related Parties  

• The Applicant is a private limited company having its head office in the State of Karnataka and branch office in the State of Tamil Nadu
• The branch office provides support services like engineering services, design services, accounting services to its head office in Karnataka
• The Applicant contended that employees are appointed and working for the Company as whole and not employed for head office or branch office specifically. Further, the salary and benefits paid to the employees are in relation to employment, which is neither supply of goods nor services under Para 1 of the Schedule III of Central Goods and Services Tax (‘the CGST Act’)

1. Whether services provided by branch office in one State to head office in another State through employees who are common to the Company constitutes supply of services
2. If it constitutes supply of services, whether such services attract GST liability

• Schedule I (2) to the CGST Act provides that supply of goods or services or both between related/ distinct persons even without consideration are to be treated as supply
• Any supply of services between two registrations of the same person in the same or in different State will be treated as supply under the CGST Act
• Employees deployed in a registered place of business providing services to another registered premise of the same person are treated as related person in terms of explanation to Section 15
• Thus, the supply of services including the services of common employees of a person provided by branch office to head office and vice versa, having separate GST registrations will attract GST Liability.