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SGST AAAR

GST – Maharashtra AAAR - ISD, Input Service Distribution, Liability to Register, Valuation of supply, Taxability of services provided by Head Office to its Branch Offices, Applicability of GST on the allocation and recovery of the salary cost of the Head Office’s employee from the Branch Offices/Units, Cross Charge, eligibility to input tax credit – Appellant procures certain common input services which are availed by head office as well as its branch offices - costs incurred by head office for procurement of such common input services is then allocated and recovered proportionately from each of the recipient units - Whether the appellant’s activities of providing facilitation services to their branch offices by way of procurement of common input services from third party vendors on behalf of their branch offices will be considered as supply and whether the same would attract GST – HELD – The GST Law has provided a very wide connotation for services, which will cover any activity other than those, which involves goods, money and securities. In view of this wide scope and coverage of the term “services”, the impugned activities of providing facilitation services to their branch offices/units by way of availment of the common input services by the Appellant’ Head office on behalf of its Branch Offices would be covered under services and will qualify as supply of services in accordance with the provision of Section 7(1)(a) of the CGST Act, 2017 as the said services are provided by the Appellant Head Office to its branch offices/units for a consideration in the course of its business - However, the cost of the said common input services availed on behest of Branch Offices/Units and allocated to the Branch Offices/Units by the Head Office will not attract the levy of GST as the said costs have been incurred by the Head Office in the capacity of a pure agent of the Branch Offices, and as such, the said cost incurred by the Head Office shall be excluded from the value of supply of the facilitation services - Eligibility to Input Tax Credit on common input services – HELD - under Section 16 of the CGST registered person is entitled to take credit of input tax charged on any supply of goods or services or both, subject to the condition that the goods or services or both received by the registered person should be used or intended to be used in the course or furtherance of business, however, in the instant case, the common input services received by the Appellant’s Head Office are being used or consumed by the Branch Office/Units in the course or furtherance of their business, and not by the Head Office, as the Head Office receives these common input services on behalf of the Branch Offices/Units - Hence, the Head Office is not entitled to avail and utilize the credit of tax paid on the common input services received by it on behalf of the branch offices/units - Appellant’s liability to register as ISD - Under Section 24(viii) of the CGST Act all the Input Service Distributors, whether separately registered under this act or not, are to be registered compulsorily as ISD - the law is very clear in this regard that any Input Service Distributors, which intends to distribute the credit of the tax paid on the common input services received by it on behalf of its branches/units, has to mandatorily register itself as an ISD, and is bound to comply with the provisions and rules made in relation thereto - In the instant case, there is no doubt regarding the appellant’s Head Office as being in the nature of the Input Service Distributor as provided in the Section 2(61) of the CGST Act, 2017 - any persons, which fulfills the condition of the ISD as provided under 2(61) of the CGST Act, 2017, and intends to distribute the credit of tax paid on account of the receipt of the common input services for its branches/units, will have to compulsorily register itself as an ISD, and it is immaterial whether the person is already holding other separate registrations under GST Act, or not - it is imperative that the Appellant’s Head Office, if it intends to distribute the credit of tax paid on account of the availment of common input services on behalf of the Branch Offices, register themselves as an ISD apart from the normal supplier’s registration - Whether the allocation of the cost of the employees’ salary by the Head Office/Corporate Office to the branch offices would attract levy of GST – HELD - the employees of the Appellant’s Head Office are working at behest of the Head Office, and not at behest of the Branch Offices/Units. Further, since the Head Office is using all its human resources to facilitate the operational requirements of the Branch Offices/Units by way of procuring common input services on behalf of the Branch Offices/Units, thereby, providing the impugned facilitation services, therefore, allocation and recovery of any amount including its employees salary cost from the Branch Offices/Units will be subject to GST - Applicability of GST on the allocation and recovery of the salary cost of the Head Office’s employee from the Branch Offices/Units – HELD - applicant reliance of entry 1 of the Schedule III to the CGST Act, 2017 is misplaced and erroneous in as much as the impugned transaction of facilitation services are not effected between the employees and the employer, but between the Head Office and Branch Offices/Units, which are distinct units in terms of Section 25(4) of the CGST Act, 2017, and the same is clearly taxable under GST in terms of Section 7 of the CGST Act, 2017. Hence the allocation and recovery of the salary of the employees of the Head Office from the Branch Office/Units will be subject to GST
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