Page 23 - GSTL_ 28th May 2020_Vol 36_Part 4

2020 ] WHETHER SERVICES PROVIDED TO A FOREIGN COMPANY BY PROJECT OFFICE J83
Allahabad is a transaction within the same company or a transac-
tion between two distinct legal entities?
(ii) If the said transaction is an intra-company transaction, whether the
amount paid to the expat employees falls under the definition of
“supply” under GST laws or will it fall under the Schedule III of the
CGST Act, 2017 i.e. “Services by an employee to the employer in the
course of or in relation to his employment?”
As regards to the first question, it was observed that Reserve Bank of India has
framed Foreign Exchange Management (Establishment, India of a branch office or
a liaison office or a project office or any other place of business) Regulations, 2016,
vide Notification No. FEMA 22(R)/2016-RB, dated 31 March, 2016. As per the said
Notification, a “Project Office” has been defined as :
‘Project Office’ means a place of business in India to represent the interests of
the foreign company executing a project in India but execution a Liaison Of-
fice.
Further, AAR observed that they agree with the applicant that a Project Office is
merely an extension of the foreign company in India to undertake the project in
India and limited to undertake compliances required under various tax and regu-
latory requirements in India. Accordingly, they held that the transactions between
the foreign company and project office is an intra-company affair.
With regard to the second question, as per the details/documents pro-
vided by the applicant, we observe that :
(i) TDS is deducted by the Project Office as an Employer on salaries
paid to Expat Employees in accordance with the Income-tax Act,
1961;
(ii) Project Office issues Form 16 as an Employer to the Expat Employ-
ees;
(iii) In the VISA issued by the Indian Bureau of Immigration the organi-
zational name of the expat employees has been written as ‘Hitachi
Power Europe GmbH’;
(iv) Professional tax is deducted from the salaries of the Expat employ-
ees and paid by the Project Office in India.
From the foregoing facts, AAR observes that the project office and the head office
are single business entity and the project office is acting as an extended arm of the
Head Office. Further the project office is fulfilling all the obligations as employer
with reference to expat employees and “Employee-Employer relation exist be-
tween the project office and expat employees”.
Further as per Section 7(2) of the CGST Act, 2017;
“(2) Notwithstanding anything contained in sub-section (1), -
(a) Activities or transaction specified in Schedule III; or
(b) …………………………
shall be treated neither as supply of goods nor a supply of service.”
Further, as per Schedule III of the CGST Act, 2017, “the services by an employee to
the employer in the course of or in relation to his employment “shall be treated
neither as supply of goods nor a supply of services”.
[Continued on page J93]
GST LAW TIMES  28th May 2020  23