Salary cost to be included in valuation for cross charge for supply of services between head office and branch office or vice versa

Last updated: 21 January 2022

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Quick Summary

The Maharashtra Appellate Authority for Advance Ruling (AAAR) has ruled that the salary costs of head office employees facilitating services for branch offices are subject to Goods and Services Tax (GST). This decision clarifies that such inter-branch service provisions, including the allocation of salary expenses, constitute a taxable supply. The ruling impacts how businesses account for shared resources and employee costs between distinct entities.

Court :
AAAR, Maharashtra

Brief :
The AAAR, Maharashtra in the matter of M/S. Cummins India Limited [Advance Ruling No. MAH/AAAR/AM-RM/01/2021-22 dated December 21, 2021] held that head office using all its human resources to facilitate the operational requirements of the branch offices/units by way of procuring common input services on behalf of the branch offices/units thereby, providing the services, therefore, allocation and recovery of any amount including its employees salary cost from the branch offices/units will be subject to GST. Hence, the allocation and recovery of the salary of the employees of the head office from the branch office/units will be subject to GST.

Citation :
Advance Ruling No. MAH/AAAR/AM-RM/01/2021-22 dated December 21, 2021

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