Notification Taxability of Supply of Goods or Services between Related and Distinct Persons read with Schedule 1 , Section 25(4), Liaison office taxability, Free Samples to Related persons
Financial Year: 2017
Supply of Goods between Related Persons
As per
Schedule 1, (Activities to be treated as supply even if made without consideration)
Clause 2,
Supply of
goods or services or both
between related persons
or
between distinct persons as specified in section 25,
when made in the course or furtherance of business
|
Section 25(4) of CGST Act:- A person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act. |
As per Explanation to Section 15 of CGST Act
For the purposes of this Act:-
(a) persons shall be deemed to be “related persons” if––
(i) such persons are officers or directors of one another’s businesses;
(ii) such persons are legally recognised partners in business;
(iii) such persons are employer and employee;
(iv) any person directly or indirectly owns, controls or holds twenty-five
per cent or more of the outstanding voting stock or shares of both of them;
(v) one of them directly or indirectly controls the other;
(vi) both of them are directly or indirectly controlled by a third person;
(vii) together they directly or indirectly control a third person; or
(viii) they are members of the same family;
Conclusion:-
Therefore inter state stock transfers or branch transfers will be subjected to GST.
If Head Office supplies some services to some branches having a separate registration number, it will be taxable as a supply.
If a branch supplies any services to HO or any other branch the same will be a taxable supply and will attract GST.
Question1:-
I have
1 Branch in Haryana say A
2 Branches in Delhi with same GST No. Say B and C
B Branch Provides some services to C Branch with same GST No.
Will there be any GST Applicability.
Answer
No GST Applicability since condition of different GST Numbers is not satisfied and nobody can provide service to itself.
Supplies to Related persons without Consideration:-
If supplies have been made to related parties without any consideration then section 15 and rule 28 of CGST Rules will be applied and values will be ascertained as per them.
GST would be payable as per values decided by Rule 28.
Maintaining a mere Liasioning office in India is not a supply of service:-
As per AAR Rajasthan in Habufa Meubelen B.V In re[2018] 95 taxmann.com 120
As per AAR Tamil nadu in Takko Holding GMBH In re [2018] 98 taxmann.com 334
If liaison office in India doesn’t render any
(a) Consultancy or
(b) Other Services
Directly/indirectly
With or without any consideration
And liaison office doesn’t have any significant commitment powers, then
Reimbursement of expenses and salary
paid by Head office to
Liaison office in India
is not liable to GST and
HO is not required to get itself registered under GST.
Free Samples given to Related Persons will be subjected to GST and Input Tax on Inputs can be availed and there is no liability to reverse the inputs.
Also No GST is applicable on Free samples given to unrelated persons. However Input tax credit needs to be reversed.
(Please read our article on Taxability of Free Samples)
Thanks
CA Rahul Gupta