Page 174 - GSTL_6th August 2020_Vol 39_Part 1

100 GST LAW TIMES [ Vol. 39
Whether the Goods and Services Tax (herein referred as ‘GST’) is applicable on
the accounting entry made for the purpose of Indian accounting requirements in
the books of accounts of Project Office for salary cost of Expat employees.
At the outset, we would like to make it clear that the provisions of both the CGST
Act and the MGST Act are the same except for certain provisions. Therefore, un-
less a mention is specifically made to any dissimilar provisions, a reference to the
CGST Act would also mean a reference to the same provision under the MGST
Act. Further to the earlier, henceforth for the purposes of this Advance Ruling,
the expression ‘GST Act’ would mean CGST Act and MGST Act.
2. Facts and contention - As per the applicant
The submissions made by the applicant is as under :-
2.1 Hitachi Power Europe GmbH (Head Office) (HO), a Company incorpo-
rated under the Laws of Germany has been awarded contracts for supply of
goods and supervisory services by M/s. BGR Boilers Private Limited (BGRB) in
relation to Projects of M/s. NTPC Limited, M/s. Meja Urja Nigam Private Lim-
ited and M/s. Damodar Valley Corporation (hereinafter referred as ‘DVC’) being
Mega power projects, located in Maharashtra, Uttar Pradesh and West Bengal
respectively.
2.2 Under the Foreign Exchange Management Act, 1999, (FEMA, 1999)
a Foreign Company executing projects in India is permitted to open an office in
India to undertake such project, commonly referred to as “Project Office”. Ac-
cordingly, HO has constituted 3 Project Offices for undertaking onshore portion
of the said Projects in India at Chennai-600004”, vide Foreign Company Registra-
tion Number (FCRN) : F04681.
2.3 Hitachi Power Europe GmbH - Project Office (Applicant), being a
Project Office (PO) in India of the Hitachi Power Europe GmbH-HO, is estab-
lished under the FEMA, 1999 and is permitted to undertake only activity of exe-
cution of project (wholly or partly) in India that is awarded to the Foreign Compa-
ny i.e., the HO, outside India.
2.4 Few employees of the HO (Expat employees) work in the Project Of-
fice in India, for whom all the employer’s obligation like Form 16 in accordance
with Section 203 of the Income-tax Act, 1961 are done by the Project Office.
2.5 Since most of these Expat employees have their primary bank ac-
counts outside India, salary is paid to these employees from the HO’s bank ac-
count located abroad, for administrative convenience.
2.6 As per the Indian Companies Act, 2013, any PO of a Foreign Com-
pany is required to maintain its financial books of accounts in a manner which
would reflect a true and fair view of the business of the Company in India. Thus,
in order to keep record of the expenses of salary cost of Expat employees work-
ing from India, the Project Office makes an accounting entry in its financial books
of accounts in India for the salary cost of the Expat employees.
2.7 The Reserve Bank of India (RBI) has framed the Foreign Exchange
Management (Establishment in India of a branch office or a liaison office or a
project office or any other place of business) Regulations, 2016 (FEMA Regula-
tions) and as per Notification No. : FEMA 22 (R)/2016-RB, dated : 31 March,
2016, a ‘Project Office’ means a place of business in India to represent the interests of the
foreign company executing a project in India but excludes a Liaison Office. The RBI has
granted general permission to foreign companies to establish Project Offices in India,

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