2018 (10) TMI 1315 – AUTHORITY FOR ADVANCE RULINGS, TAMIL NADU – 2018 (19) G. S. T. L. 692 (A. A. R. – GST) – Levy of GST – Supply of services or not – activity of Liaison office – concept of distinct person and related person. – Whether liaison office is liable to pay GST? – Held that:- The applicant/liaison office is working as per the terms and conditions stipulated by RBI and the reimbursement of expenses & salary of employees is paid by Mls Takko Holding GmbH to the liaison office. No consideration for any activity is being charged by the liaison office and the liaison office does not have any business activities of its own as specified by RBI conditions.
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Further, Schedule I of CGST Act specifies that supply of services between related parties or distinct persons as per Section 25, even without consideration, constitute a supply.
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Takko is acting as an extension of the German Office in its procurement activities from suppliers in India as has been spelt out in the RBI
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h the Central Goods and Services Tax Act and the Tamil Nadu Goods and Services Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Services Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Services Tax Act. Takko Holding GmbH is a company incorporated in Germany. They are permitted by RBI to have a Liaison Office of the company at 1/1 J-16, Thannerpandal Colony, Avinashi Road, Anupparpalayam, Tirupur-641652 (hereinafter referred to as Takko or the Applicant ) under certain conditions. Takko is not registered under GST. The applicant have submitted the copy of application in Form GST ARA-01 and also submitted a copy of Challan evidencing payment of application fees of ₹ 5,000/- each under sub-rule (1) of Rule 104 of CGST Rules, 2017 and SGST Rules, 2017. They have sought advance ruling on the following : (1) Whether liaison o
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ct in their own name without prior permission. No commission/fees be charged or any other remuneration received/income earned by the office in India for the liaison activities/services rendered by it or otherwise in India. 2.2 The activities of Takko are : (1) Order enquiries are received from German office and sent to the supplier in India for their price quote; (2) Prices are collected from various suppliers, and informed to German office; (3) German office confirms the order for the supplier with lowest price quote deliver terms; (4) The order production process are followed by Merchandising Department (collecting data for each stage of the progress till the execution of order) and communicated to German office; (5) The Quality Department audits/monitors the quality parameters of the merchandise on continuous basis until the final inspection of the merchandise & shipment and communicates with the Supplier and the German office; (6) The Shipping Department coordinates with G
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on from related persons or distinct persons as German Office and Liaison Office are not related person as there is only one legal entity and no relationship can be established. They are not a distinct person under Section 25 as distinct persons have establishments in more than one state or Union Territory. As per RBI terms and conditions, they are not engaged in any business or furtherance of business as they are only acting as communication channel between German office and Indian exporters. They are not permitted to obtain IE Code, raise invoice on German office and hence are not required to take registration under GST. 3.1 The Applicant was heard in person on 16.05.2018 and 2I.06.2018. They have stated that the Holding company procures Readymade garments based on designs given by them to manufacturers in Tirupur ; they do not have any financial transactions with such suppliers or sister firms around the world; the expenses of administration are paid by Germany office routed through
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dertake only the limited set of activities as listed in para 2.I above. No other activities are permitted and no consideration shall be charged for the liaison activities or any other activities in India. Liaison Office cannot render any consultancy or any services directly /indirectly with / without consideration. All expenses of the office are to be met only out of funds received from abroad. This is substantiated by the Statement of accounts, Annual Statement Form 49C filed under Income Tax Act, Bank Inward Remittance advice submitted by the Applicant. It is seen from the screenshots of online software supplied by the Applicant that all communication for the various liaison activities are undertaken through electronic means. The activities undertaken by the applicant include communicating to suppliers in India the order enquires received from German office, communicating to German office price quotes received, collecting order sheets and communicating to the concerned supplier. The
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Activities of a liaison office amount to supply of services? The above questions may be answered by first clarifying whether the liaison activities undertaken by the applicant amounts to a supply and then whether it is a taxable supply and whether the applicant should take registration under CGST /SGST Act. 4.2 In the case at hand, Takko are working as the liaison Office of M/s. Takko Holding GmbH, Germany with the prior permission of RBI. Liaison Activities include acting as communication channel between the parent company and Indian supplier of goods to parent company at Germany in terms of the procurement, order placement, quality checks, and technical support shipping of the Readymade garments. Takko is not receiving any consideration for this from the suppliers. Except this liaison work, this office in India would not undertake any activity of trading, commercial or industrial nature nor would they enter into any business contracts in its own name without RBIs prior permission. Th
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(b) import of seruices for a consideration whether or not in the course or furtherance of business; (c) the actiuities specified in Schedule I, made or agreed to be made ruithout a consideration; and (d) The actiuities to be treated as supply of goods or supplA of seruices as referred to in Schedule II. From the submissions made by the applicant as discussed in above paras, it is seen that the applicant/liaison office is working as per the terms and conditions stipulated by RBI and the reimbursement of expenses & salary of employees is paid by Mls Takko Holding GmbH to the liaison office. No consideration for any activity is being charged by the liaison office and the liaison office does not have any business activities of its own as specified by RBI conditions. Further, Schedule I of CGST Act specifies that supply of services between related parties or distinct persons as per Section 25, even without consideration, constitute a supply. Takko is acting as an extension of the German
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