Tamil Nadu’s Authority for Advance Rulings (TN AAR) has held that services rendered by an employee of a branch office to the head office and vice versa, each having separate GST registration, would be subject to the goods and services tax. This, analysts said would have significant ramifications and could open Pandora’s box for litigations.

The central GST treats different registrations, even if they are of the same entity, as distinct persons, the AAR said while giving reasons for its decision.

The bench took note of Section 25(4) of CGST Act, 2017 which states that “a person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act.” It mentioned that this provision, along with other related ones, will be applied to any supply of service between two registrations of the same person in the same State or different States.

Accordingly, it ruled: “Services, including the services of common employees of a person, provided by branch office to head office and vice versa, each having separate GST registration, will attract GST liability under respective Acts, viz IGST Act, 2017 or CGST Act, 2017 and SGST Act, 2017 or UTGST Act, 2017.”

The order of the Tamil Nadu AAR is in line with a ruling of the Maharashtra AAR and yet another ruling of the Karnataka AAR.

The applicant, Profisolutions Private Limited, is a Bangalore-based company with the branch office in Tamil Nadu, having registered under GST law in their respective states. The company moved to TN AAR to get advance ruling on whether providing service by a branch office in one state to the head office in another state through employees who are common to the company constitutes a supply of service in terms of GST law. And, if the answer is yes, then whether such services will attract GST.