The Karnataka-based Authority for Advance Rulings (AAR) has ruled that Goods and Services Tax (GST) will be levied on Liaisoning services by the branch office (BO) of a foreign entity in India. It will come under taxation even if transactions between them happen without any consideration.
The said decision came in a case related to business and promotion activities by the Bengaluru-based branch office (BO) of a head office (HO) located in Germany.
Partner at KPMG, Harpreet Singh said in this matter that “The authorities referred to the concept of related persons as mentioned in section 15 of the Central GST Act 
Get to know about GST levy terms on disposal of the company’s capital goods under the CGST Act 2017. Also, we mentioned GST on the disposal of capital assets, if no ITC is claimed on capital goods. Read more to reach at this decision that the applicant and its head office (HO) can be considered as related persons”.
Therefore, the activities are undertaken by the applicant “falls under the scope of supply even in the absence of consideration, as it is in relation to the furtherance of business,” as stated by the authority.
The ruling states that the branch office (BO) of a head office (HO) will be treated as establishments of individual or distinct persons and the activities undertaken by them cannot be termed as export of services.
Harpreet Singh further added in his statement that: “While transactions between related persons are liable to GST, even if the same is without consideration, ascribing value to the same is always a challenge, especially when appropriate benchmarking is not available.” Thus such services attract GST at an 18 percent rate.
