Page 179 - GSTL_6th August 2020_Vol 39_Part 1

2020 ] IN RE : HITACHI POWER EUROPE GMBH 105
the foreign company executing a project in India and undertakes commercial
activities related to the particular project.
1 5.5 Applicant has stated that, as a Project Office in India they supply
goods and services for undertaking onshore portion of the project on payment of
applicable GST to customers in relation to the specific projects carried out at the
various sites in India and for this purpose, the Project Office has obtained regis-
tration under the GST legislation in various States in India.
5.6 The Project Office has its own employees and also some employees
of the Head Office (Expat employees) who work in the Project Office 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.
5.7 As per the provisions of the Companies Act, 2013, applicant is re-
quired to maintain its financial books of accounts in a manner which would re-
flect 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 working from
India, the Project Office makes an accounting entry in its financial books of ac-
counts in India for the salary cost of the Expat employees even though the salary
is paid by the Head Office. We also observe that the PAN and TAN has been al-
lotted to the Project office in the name of the Head Office situated abroad, by the
Income Tax Authorities. Hence we find that a project office is an extension of the
foreign Head Office, and as in the subject case shall carry on all activities relating
and incidental to execution of the Project in India. Thus we find that the expat
employees are employees of the employer i.e. the Head Office and since the Pro-
ject Office is an extension of the Head Office, there is a relation of employer and
employee between the Project Office and the expat employees.
1 5.9 For GST to be 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 paid by the Head Office, such account-
ing entry should be seen as a supply of goods, services or both. Since we find
that there is a relation of employer and employee between the Project Office and
the expat employees, the provisions of Schedule-III of the CGST Act comes into
play in this case as per which services by an employee to the employer in the
course of or in relation to his employment will not be considered as a supply and
therefore will not attract GST.
6. In view of the above discussions, we pass an order as follows :
ORDER
7. For reasons as discussed in the body of the order, the questions are
answered thus -
Question 1. 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 employ-
ees
Answer :- Answered in the negative.

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1 Paragraph number as per official text.
GST LAW TIMES  6th August 2020  179