"Distinct Person" under the GST Act is a recipe for inviting tax litigation

The All India Tax Advocates' Forum (AITAF) has urged Finance Minister Arun Jaitley to take a re-look at the existing definition of "Distinct Person" under the Central GST Act to protect legitimate interests of trade and industry and to avoid potential tax litigation in coming years.

"The definition of "Distinct Person" under the section 25 (4) of CGST Act, 2017 is causing concern among the trade and industry having pan India presence with branch offices spread across the length and breadth of the country," said the AITAF president M K Gandhi in a statement issued here.

As per the existing definition under the section 25 (4) of CGST Act, 2017 any sort of activity like rendering of advice and consultation and hiring of personnel between head office of such establishments having all India presence and their branch offices located at various places across the country will attract levying of GST, Gandhi a noted tax consultant said.

He said that in transactions like this, Head Office would be incurring avoidable expenditure like setting up branch offices, cost incurred at offices to manage the operations of branches, recruitment of personnel to be employed at branch offices, provision of advices and consultancy between the head office and branches and all these expenses will come under the ambit of GST.

"Such type of levying of GST on internal transactions between head office of establishments and their branch offices will lead to unnecessary tax litigation in coming years questioning GST liability," Gandhi cautioned.

In this back drop, the AITAF Chief called upon the Finance Minister to redefine the concept of "Distinct Person" to protect genuine and legitimate interests of trade and industry having pan India existence."

He further added that such definition "Distinct Person" would hamper the morale of trade and industry across the country which will hurt the overall economy of the country.