REIMBURSENT BY FOREIGN HEAD OFFICE TO INDIAN LIAISON OFFICE NOT LIABLE TO GST: NO SEPARATE ENTITY, NO SUPPLY

REIMBURSENT BY FOREIGN HEAD OFFICE TO INDIAN LIAISON OFFICE NOT LIABLE TO GST: NO SEPARATE ENTITY, NO SUPPLY

RAJASTHAN AUTHORITY FOR ADVANCE RULING

GOODS AND SERVICES TAX

Before the Bench of:

1. Nitin Wapa, Member (Central Tax)

2. Sudhir Sharma, Member (State Tax)

Case Title :- M/s Habufa Meubelen B. V.

(GST AAR RAJASTHAN)

Advance Ruling. RAJ/AAR/2018-19/05

Date of Judgement/Order- 16th June 2018

ISSUE FOR DETERMINATION

Para No. 2.The questions/ issues before the Authority for Advance Ruling (AAR) for determination are:

2.1 Whether the reimbursement of expenses and salary paid by M/S Habufa Meubelen B.V.(HO) to the liaison office established in India is liable to GST as supply of s especially when no consideration for any services is charged/ paid.

2.2 Whether the applicant i.e. the Liaison Office is required to get registered under GST?

2.3 If it is assumed that the reimbursement of expenses and salary claimed by liaison office is a consideration towards a service, then what will be the place of supply of such service?

FINDINGS

Para No. 6.2. The HO, Netherlands reimburses the expenses incurred by the applicant for their operations in India which are in the nature of salary, rent, security, electricity, travelling etc. The applicant does not have any other source of income and it is solely dependent on the HO for all the expenses incurred by the applicant, which are subsequently reimbursed by the HO. Therefore the HO and Liaison Office cannot be treated as separate persons. Since, HO and Liaison Office cannot be treated as separate persons, there cannot be any flow of services between them as one cannot provide service to self and therefore, the reimbursement of expenses made by the HO cannot be treated as a consideration towards any service.

Para No. 6.4. Further the liaison office is strictly prohibited to undertake any activity of trading, commercial or industrial nature or entering into any business contracts in its own name. Also the reimbursement claimed by them from their HO is also falling out of the purview of supply of service. As there are no taxable supplies made by the Liaison office, they are not required to get registered.

Para No. 6.5. In view of the submissions made by the applicant and as discussed in above paras, when the applicant/liaison office is working as per the terms and conditions as mentioned under para 1.1 to 1.5 above, the reimbursement of expenses and salary paid by M/S 1–labufa Meubelen B.V to the liaison office, is not liable to GST, as no consideration for any services is being charged by the liaison office. Further, the kind of reimbursement claimed by them from their HO is also falling out of the purview of supply of service and as there are no such taxable supplies made by the Liaison office, they are not required to get themselves registered er GST.

RULING

In view of the foregoing, we rule as under:

If the liaison office in India does not render any consultancy or other services directly/in directly, with or without any consideration and the liaison office does not have significant commitment powers ,except those which are required for normal functioning of the office, on behalf of Head Office, then the reimbursement of expenses and salary paid by M/S Habufa Meubelen B.V. (HO) to the Liaison Office, established in India, is not liable to GST and the applicant i.e. M/S Habufa Meubelen B.V. Jaipur, is not required to get itself registered under GST.