Does the chief executive of large companies headquartered in Mumbai towards the firm or just the head office?
Are there any common expenses like salary, marketing, branding, or legitimate expenses be circulated to the branch offices or taken by head office only?
In a recent ruling via appellate authority for the advance ruling (AAAR) mentioned that the salary allocation of the head office employee to the branch and its recovery from there would be qualified for GST.
“Taxation of transactions between head office and branch office has been a contentious issue since the inception of GST as the said transactions were not liable to any tax under the erstwhile regime,” said tax expert.
Cummins India mentioned that AAAR posted the query that if the allocation of the cost of the employee’s salary via head or corporate office to its branch shall draw GST. The same seek for clarity for the GST on allocation and recovery of the salary cost of head office’s employees from the branch offices.
Maharashtra AAAR ordered that GST be levied for both. The ruling mentioned that the head office does not qualified to claim the input tax credit on the tax furnished on the common services.
ITC is a working that is important in which the GST furnished on specific raw material or input services would be partially set off with respect to the subsequent tax liability.
Beneath the GST platform, the companies need to avail of the additional enrollment in every state and split all the expenses. For the firms, there are specific expenses that are common to companies like such as advertising, paying lawyers, or even travel expenses furnished by the CEO. the question towards various firms is what is the method to split them and in what proportion.
Beneath the GST platform, there is a process known as the Input service distribution (ISD), the companies would avail the same enrollment and provide the cost or the tax credit for all the registration.
To make a precedent is another Ruling, mentioned by tax experts.
The Authority for Advance Ruling (AAR) in the former year mentioned that the firms should “value” services through CXOs and then levy the same towards the subsidiaries through the separate GST enrollment all over India. The ruling mentioned that the firms were needed to cross charge the mutual expenses like salaries of top management all over the branch offices.
The problem has been reported when the indirect tax council has begun to question some of the firms and the banks towards CXO salaries. Very soon post to the government urging that it will furnish a clarification.
