Page 22 - GSTL_ 28th May 2020_Vol 36_Part 4

J82 GST LAW TIMES [ Vol. 36
(3) The applicant has obtained Permanent Account Number (PAN) and
Tax Deduction Account Number (TAN) in the name of Head Office,
as the applicant is only an extension of the office of Hitachi Power
Europe GmbH Germany and not an independent entity.
(4) The applicant has deducted Tax Deducted at Source (TDS) under
the head ‘Income under Salaries’ for these employees under the In-
come-tax Act, 1961 in India.
(5) Form 16 under the Income-tax Act, 1961 for salary deduction has
been issued in India for these employees by the Applicant.
(6) For the purpose of administration convenience, the quantification of
the above salary cost and payment of the same to most of these Ex-
pat employees were made from the Head Office’s bank accounts to
the employees’ bank account outside India.
(7) Under the Indian Companies Act, 2013, the Foreign Company is re-
quired to prepare its financial statement accounting for all expenses
and its corresponding income earned in India from the India Pro-
jects.
(8) In order to comply with the above requirements, the Foreign Com-
pany makes an accounting entry amongst others for the cost of Ex-
pat employees’ salary cost in its books of account based on the ac-
counting debit note provided by the Head Office.
(9) It is important to note that the above accounting of the salary costs
is made for the purpose of compliances under the Indian Compa-
nies Act, 2013 and the project office is not obliged to make any re-
mittance to Head Office for the above entry.
(10) As per Explanation 2 to Section 8 of the Integrated Goods and Ser-
vices Tax Act, 2017 ( IGST Act, 2017) “A person carrying on a busi-
ness through a branch or an agency or a representational office in
any territory shall be treated as having an establishment in that ter-
ritory.”
(11) The applicant also places reliance on the Advance Ruling pro-
nounced by the Tamil Nadu Authority in the case of M/s. Takko
Holding GmbH, reported in 2018 (19) G.S.T.L. 692 (A.A.R. - GST).
Contention of the applicant
The transaction under reference would not fall under the meaning of the
term ‘supply’ for the following reasons :
(a) No intention to provide or receive services and hence do not fall
under the scope of the term ‘supply’;
(b) The said transaction is covered under the scope of activities or
transactions specified in Schedule III - “Services by an employee to
the employer in the course of or in relation to his employment’ and
is hence outside the ambit of GST; and
(c) The transaction will not qualify as ‘import of services’.
Discussion and finding
Advance Ruling Authority observes that the issue before them to decide
is -
(i) Whether the transaction between M/s. Hitachi Power Europe
GmbH and its project office located at Meja Thermal Power Project,
GST LAW TIMES  28th May 2020  22