Page 176 - GSTL_6th August 2020_Vol 39_Part 1

102 GST LAW TIMES [ Vol. 39
amongst others for the cost of Expat employees’ salary cost in its books of ac-
counts based on the accounting debit note provided by the Head Office.
2.13 The accounting of the salary costs is made for the purpose of com-
pliances under the Indian Companies Act, 2013 and the Project Office is not obli-
gated to make any remittances to HPE Germany Head Office for the above entry.
Hence the Applicant has filed this application to obtain clarity on whether ac-
counting of salary cost for the purpose of compliance under Indian Companies
Act, 2013, with no obligation to pay any consideration would be treated as a ser-
vices and be subject to levy of GST in India under Reverse Charge Mechanism.
2.14 The Applicant has also submitted that their Project Office is merely
an extension of the Foreign Company in India and maintains Financial State-
ments only for the requirements under the Companies Act, 2013. The rights and
responsibilities of the Project Offices in India are not independent from that of
the Head Office. The Project Office does not enter into contracts directly and it
only executes the contract executed by the Head Office and is completely funded
by the Head Office and any surplus of the Project Office is repatriated to Head
Office.
2.15 The applicant has made various submissions supporting their con-
tention that accounting of Salary of the Expat Employees in their Books of Ac-
counts even though the salary is paid by the HO, is not taxable under GST. They
have also cited various case laws in support of their contention.
2.16 They have further submitted that Services provided by an em-
ployee to an employer in the course of employment are outside the ambit of GST
as per Schedule III of the CGST Act, 2017.
2.17 The Applicant submits that the Project Office is an office of the
Foreign Company in India and not a separate entity and does not have any inde-
pendent legal or contractual obligations as per provisions of FEMA/by virtue of
PO being an extended arm of HO. Further, the Income-tax Act, 1961 does not
differentiate a Project Office from its Head Office for the purpose of tax assess-
ments, as the Head Office and Project Office are treated as ‘Single Assessee’ for
the purpose of tax assessments, filing of returns etc. It is also important that the
Project Office pays tax at the rate which is higher and equal to a rate at which the
Foreign Companies are taxed in India, under the Income-tax Act, 1961. Hence
PAN and TAN has been issued in the name of the Head Office (i.e., Hitachi Power
Europe GmbH) instead of issuing in the name of Project Office. Applicant has de-
ducted TDS under the head ‘Income under Salaries’ for such employees working in
India under Section 192 of the Income-tax Act, 1961 in India.
2.18 Salary cost paid to Expat employees working for the Indian Project
which are accounted in the books of accounts to reflect the true and fair view of
the financial statements of Project Office to comply with the provisions of the
Companies Act, 2013 does not qualify as ‘Service’ as there is no recipient of ser-
vice in the instant case, allocation of salary cost of employees of the Holding
Company to its Subsidiary Company would not be subject to levy of GST as per
Schedule III of the CGST Act, 2017 and there is no understanding or agreement
to import any service, as the Project Office is only extension of HPE Germany.
2.19 Applicant has placed reliance on the recent decision held by the
Honourable CESTAT, New Delhi in the case of CCE & ST v. Nissin Brakes India
Private Limited [2018-TIOL-1976-CESTAT-DEL = 2019 (24) G.S.T.L. 563 (Tri. -
Del.)], which has been upheld by the Honorable Supreme Court [TS-230-SC-
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