QUESTION

ABC is a foreign company having its foreign branch registered with RBI/ROC/ITax in India, The main objective of the branch is to provide the services to its Head Office in Foreign due to availability of cheap IT Labour in India, the foreign branch doesn`t have any revenue in India but having expenditure of Approx 60 Lakh for providing services to head office for which the foriegn branch received reimbursement from HO. Query is, whether the foreign branch in India is required to apply for GST Registration for providing such services to its HO, though the branch doesn`t have any income in India except reimbursement of approx 60 lakh from HO (Foreign Company).

ANSWER

FACTS OF THE CASE:

Whether Foreign branch registered with RBI/ROC/ITax in India providing services to HO doesn`t have any income in India except reimbursement of approx 60 lakh from HO requires to take registration in GST.

LAW APPLICABLE:

SECTION 8 of IGST Act

Explanation 1.''For the purposes of this Act, where a person has,''

(i) an establishment in India and any other establishment outside India;
(ii) an establishment in a State or Union territory and any other establishment outside that State; or
(iii) an establishment in a State or Union territory and any other establishment registered within that State or Union territory,
then such establishments shall be treated as establishments of distinct persons.

SECTION 22 OF CGST ACT

(1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees:

SECTION 24 OF CGST ACT

Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act,-

(i) persons making any inter-State taxable supply;------------------------------

INTERPRETATION:

Since HO is located outside India and branch is located in India, therefore Branch and HO are considered as distinct persons as per the Explanation given in Section 8 of IGST Act.

Supply of services between distinct persons when made in course or furtherance of business is considered as supply even if it is without consideration as per clause (2) of Schedule I of CGST Act.

Further as per section 22 person is required to take registration if his aggregate turnover in a financial year exceeds twenty lakh rupees. Also section 24 of CGST Act requires compulsory registration in case of person making inter state taxable supply.

CONCLUSION:

Branch located in India providing services to HO located outside India is required to take registration in GST. (Reply dt. 26/04/2022)