GST Applicability on sharing of expenses

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This query is : Resolved

thameem ansari (Querist)

30 October 2019 Can anyone please let me know the GST Applicability on sharing of expenses by holding company with subsidiary company.

1. A is a holding company. B is its subsidiary company. Both the companies carry on their business from same premises. In other words, Place & Nature of Business of both the companies is one and the same. Both the companies are registered under the GST law.
2. Common related expenses such as Salaries, courier expenses, office rent, telephone expenses, motor car expenses, printing & stationery expenses, royalty expenses, overhead expenses, accounts & admin department expenses etc are borne by company ‘A’.
3. At the end of the year, company ‘A’ shares these expenses with company ‘B’. For this purpose, company ‘A’ issues tax invoices to company ‘B’. Company ‘A’ pays the tax along with returns.
4. Company ‘B’ record these transactions in its books of account as tax paid
purchases and claim ITC (Setoff) in its returns.
5. Querist seeks to know whether this arrangement is in accordance with the law and whether there are any issues which may be raised by Revenue Authorities?

CA Anita Bhadra

CA Anita Bhadra (Expert)

30 October 2019 In case the holding company provides any supply/services to the subsidiary company, then only it will be considered as related party transaction and subject to GST according to schedule 1

re reimbursement of actual expenditure by B company to A company is not supply under GST Act.
In my view, this arrangement is not in accordance with law and B company can directly get the invoices for expenditure and avail the ITC

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