Liaison Office not liable to pay GST on Services Rendered by Head Office

In The World Economic Forum, India Liaison Office, [GST-ARA- 11/2019-20/B-50 dated August 20, 2021], the World Economic Forum, India Liaison Office ('the Applicant') has sought clarification on whether the activities carried out by the Applicant's Head Office ('HO') located outside India would amount to Supply under Section 7 of the Central Goods and Services Tax Act, 2017 ('CGST Act') and if the same would be liable to Goods and Service Tax ('GST') in the hands of applicant.  Along with that, the Applicant has also seeked clarification on whether it would be required to obtain registration in India under Section 24 of the CGST Act for the activities rendered by HO outside India considering the applicant is not engaged in any business.

The Hon'ble Maharashtra Authority of Advance Ruling ('MAAR') by taking into account Section 7(1)(b) and Schedule 1 of the CGST Act as well as relying on Schedule II of Notification No. 22/2000-RB dated May 03, 2000 of Foreign Exchange Management Act, 1999 ('FEMA Notification') which specifies the permitted activities for a Liaison Office ('LO') in India, observed that the Applicant is not undertaking any business and therefore the activities of services received by the Applicant from its HO cannot be said to be in course of furtherance of business, thus cannot be considered as 'Supply' under section 7 of the CGST Act.

Further noted that as long as the services imported by the applicant from its HO are not used in the course of business, the Applicant is not liable to pay GST on such transactions. Being a corollary in the import of service in the current case and not being considered a supply, there is no requirement of registration under Section 24 of the CGST Act by the Applicant.

Our Comments

In the past, there has been several divergent Advance Rulings provided by various State Advance ruling Authorities holding opinion on the current matter which provides as follows:

• The Karnataka Appellate Authority of Advance Ruling ('KAAAR') in re Fraunhofer-Gesellschaft ZurForderung der angewandten Forschung [Order No. KAR/AAAR/04/2021 dated February 22, 2021] observed that activities of the LO to carry out activities permitted by the Reserve Bank of India ('RBI') does not amount to 'Supply of Services'.
• The Maharashtra Authority of Advance Ruling ('MAAR') in Dubai Chamber of Commerce and Industry ('DCCI') [GST-ARA-35-2019-20B dated May 24, 2021], held that the Applicant which provided services of connecting business partners in Dubai with businesses in India for a consideration should be covered in 'intermediary' under Section 2(13) of the Integrated Goods and Services Act, 2017 ('IGST Act').
• The Tamil Nadu Authority of Advance Ruling ('TNAAR') in Takko Holding GmbH [Order No. 14/AAR/2018 dated September 27, 2018] and Rajasthan Authority of Advance Ruling ('RAAR') in Habufa Meubelen B.V. [RAJ/AAR/2018-19/05 dated June 16, 2018] held that liaison activities undertaken by the Applicant as a communication channel between Indian Supplier and Parent Company does not constitute supply under GST.