2018 (8) TMI 876 – AUTHORITY FOR ADVANCE RULINGS, KARNATAKA – 2018 (15) G. S. T. L. 722 (A. A. R. – GST) – Levy of GST – Supply or not – distinct persons – Whether the activities performed by the employees at the corporate office in the course of or in relation to employment such as accounting, other administrative and IT system maintenance for the units located in the other states as well i.e. distinct persons as per Section 25(4) of the Central Goods and Services Tax Act, 2017 shall be treated as supply as per Entry 2 of Schedule I of the CGST Act or it shall not be treated as supply of services as per Entry 1 of Schedule III of the CGST Act?
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Held that:- Since the IMO is covered under one registration in the state of Karnataka and the units are covered under different registrations, and the units are controlled by the IMO, they both are related persons. By implication, any supply of goods and services from IMO to the separately registered units would amount to supply of goods
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for the units located in the other states as well i.e. distinct persons as per Section 25(4) of the CGST Act shall be treated as supply as per Entry 2 of Schedule I of the CGST Act. – Advance Ruling No. KAR ADRG 15 / 2018 Dated:- 27-7-2018 – Sri. Harish Dharnia, Joint Commissioner of Central Tax, Member (Central Tax) And Dr. Ravi Prasad M.P. Joint Commissioner of Commercial Taxes Member (State Tax) ORDER M/s Columbia Asia Hospitals Private Limited, (called as the Applicant‟ hereinafter), having its registered office at The Icon, 2nd Floor, No.8, 80 feet Road, HAL III Stage, Indiranagar, Bengaluru 560075 has filed an application for Advance Ruling under Section 97 of CGST Act, 2017, KGST Act, 2017 read with Rule 104 of CGST Rules 2017 & KGST Rules 2017, in form GST ARA-01 discharging the fee of ₹ 5,000-00 each under the CGST Act and the KGST Act. 2. The Applicant is a private limited company engaged in providing health care services categorizing them as In-patient (IP)
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n international heathcare group operating a chain of modern hospitals across Asia. The Company is currently operating across six different states having eleven hospitals out of which six units are in the state of Karnataka. The Hospitals owned by the applicant are engaged in providing secondary and tertiary Healthcare services which in turn categorises as In-patient (IP) and Out-patient (OP) services. b. The applicant has its India Management Office ( IMO ) i.e Corporate Office in Karnataka and some of the activities for all the units with respect to accounting, administration and maintenance of IT system are carried out by the employees from IMO which forms part of the registered person in Karnataka. Further, GST paid on certain expenses such as rent paid on immovable property and other equipments, travel expenses, consultancy services, communication expenses etc., which are incurred towards services used by the IMO are availed by the registered person in the state of Karnataka and su
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Services received at IMO * Turnover of Pune/Total turnover of all Units = 100000 * 1000000 = ₹ 10,000-00 / 10000000 Therefore, Company in Bangalore would raise an invoice for ₹ 10,000-00 on the Company in Pune and discharge the applicable GST on this amount. d. However, the applicant states, with respect to employee cost there are no invoices raised by the management office treating the same as activities carried out by employees in the course of or in relation to his employment which does not amount to supply of services. e. With these facts, the applicant has sought an advance ruling on the matters already enumerated above. 4. The applicant states that as per Section 7(1)(c) of the Central Goods and Services Tax Act, 2017, the term Supply includes the activities specified in Schedule I, made or agreed to be made with or without a consideration . Further, as per Section 7(2) of the CGST Act, activities or transactions specified in Schedule III shall be treated neither as a
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o the employer in course of or in relation to his employment shall be neither treated as a supply of goods not a supply of services. 6. The word employee cannot be restricted to employment with the registered person as per Section 2(94) of the CGST Act merely on account of the location from where he renders his employment services. The employment relationship exists between the employee and employer, i.e. legal entity as a whole and not confined to the location of registered person from where the said employee renders services. When an employee renders any services to other registered persons, i.e. distinct persons of the same legal entity, the nature of activities still assumes the character of services by an employee to the employer in the course of or in relation to his employment as he is an employee for the legal entity as a whole and not for any one registered person. Hence, the services rendered by employees towards accounting and other administrative functions pertaining to oth
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he question asked. 8. FINDINGS & DISCUSSION: The contention of the applicant is examined. 8.1 Regarding the applicability of entry No.2 of Schedule I to the activities of accounts and management done by the IMO for the individual units located both within the State and also outside the state, the following is observed: The entry 2 of Schedule I, which deals with the activities that are to be treated as supplies even if made without consideration, reads as under: 2. Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business 8.2 Further, the explanation given in Section 15 of CGST Act 2017, defines the related persons as under: For the purposes of this Act,- (a) persons shall be deemed to be related persons if- i. such persons are officers or directors of one another‟s businesses; ii. such persons are legally recognised partners in business; iii. such persons are employer
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ncludes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. . . (b) . . . (c) the activities specified in Schedule I, made or agreed to be made without a consideration; and (d) . . . Hence any activities made between related persons made or agreed to be made without a consideration shall be covered under supply of goods or services. The valuation of such services is to be done as per the provisions of section 15 of the Central Goods and Services Tax Act, 2017 and if any consideration is charged by issue of invoice by the IMO to the respective units would amount to transfer and hence supply as it is in the course of business under clause (a) of sub-section (1) of section 7. Further, these activities made between the IMO and the separately registered units are not covered under any of the entries in Schedule III
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the employees of one distinct entity with another distinct entity, at least as per the Goods and Service Tax Acts, even if they are belonging to the same legal entity. Further, the activities made between the related persons are treated as supplies and the valuation includes all costs, the employee cost also needs to be taken into consideration at the time of valuation of goods or services provided by one distinct entity to the other distinct entities. 9. In view of the foregoing, we rule as follows RULING The activities performed by the employees at the corporate office in the course of or in relation to employment such as accounting, other administrative and IT system maintenance for the units located in the other states as well i.e. distinct persons as per Section 25(4) of the Central Goods and Services Tax Act, 2017 (CGST Act) shall be treated as supply as per Entry 2 of Schedule I of the CGST Act. – Case laws – Decisions – Judgements – Orders – Tax Management India – taxmanagem
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