Supply of common administrative services by HO to other units leviable to GST: Haryana AAR

 

 

Summary

The Haryana Authority for Advance Ruling (AAR), in a recent case, has held that the services supplied by a head office to its other units/offices by way of performing activities, such as accounting, marketing support, administrative support, IT support, sales planning, training, policy formation, is leviable to GST. 
 

Our comments

Most business organisations with a pan-Indian presence have similar operating models, wherein the employees at the corporate office or the head office render common group services to other units.

The Karnataka Appellate Authority for Advance Ruling (AAAR) in the case of M/s Columbia Asia Hospitals Pvt. Ltd. had held that the corporate office is providing service to its other distinct units by way of carrying out activities such as accounting, administration work. with the use of the services of the employees working in the corporate office the outcome of which benefits all the other units and such activity shall be treated as a taxable supply. The Karnataka High Court has granted a stay on the AAAR’s order and the decision is awaited.

While the Karnataka AAAR did not discuss the valuation of such supply, the Haryana AAR has held that the value arrived at by the applicant with respect to the provision of such services by the HO on a reasonable basis and declared in the respective invoice would be deemed to be the open market value in respect of each such invoice raised on the units.