In-house functions of an organisation's office such as human resources, accounts and payrolls, if carried out from a centre in one state for offices in other states, will come under the GST net, Economic Times reported on Tuesday. Invoices for the same will have to be issued.
What this means is that companies with multi-state offices will suffer as services provided by an office in one state to another office in any other state will face goods and services tax. The move would add to their transaction costs and compliance burden. Moreover, the issue of cross charge is likely to lead to a lot of confusion on the ground.
A circular endorsed by the GST Council, will be issued soon, a government official told ET, and it will spell out how the input tax credit will be distributed between head office and branch officers as also that value of service will be equal to employee cost and establishment cost of supplying that service.
In December 2018 the Karnataka Appellate Authority for Advance Rulings upheld the levy of goods and services tax on services rendered by one office branch to other centres. AAR, had passed the order in a case pertaining to Columbia Asia Hospitals, and had said companies are required to be cross charged and levy GST on the same. ( Read the full order here)