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TMI Blog2019 (11) TMI 1596X X X X Extracts X X X X X X X X Extracts X X X X ..... t. ? - HELD THAT:- The project office and the head office are single business entity and the project office is acting as an extended arm of the Head Office. Further the project office is fulfilling all the obligations as employer with reference to expat employees and Employee-Employer relation exist between the project office and expat employees - Further, as per Schedule Ill of the CGST Act, 2017, the services by an employee to the employer in the course of or in relation to his employment shall be treated neither as supply of goods nor a supply of service. Thus, as the service provided by the expat employees to the project office fall under the category of Services by an employee to the employer in the course of or in relation to his employment . Accordingly, no GST is leviable on the salary paid to the expat employees and reflected in the books of accounts of the project office. - Order No. 43(ii) - - - Dated:- 11-11-2019 - AJAY KUMAR MISRA AND DINESH KUMAR VERMA, MEMBER PROCEEDING OF THE AUTHORITY FOR ADVANCE RULING U /S. 98 OF THE GOODS AND SERVICES TAX ACT, 2017 Sub:- GST ACT, 2017 - Advance Ruling U/s 98 - liability to tax under GST Act in respect to ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Project Office should close down its operations in India after completion of the specified project. 5). For carrying out the projects in India, the Expat employees (employees of the Head Office) would work out from the Project Office in India. As the Project Office is not a separate legal entity and merely an extension of Head Office in India, these Expat employees are employees of Project Office. 6), With regard to these Expat employees, the Applicant submitted that: a The VISA has been issued by the Indian Bureau of Immigration by mentioning the name of Head Office i.e., Hitachi Power Europe GmbH under the column Organizational Name with the address of the Project Office in India. b The Applicant has deducted Tax Deducted at Source ( TDS ) under the head Income under Salaries for these employees under the Income Tax Act, 1961 in India. c Form-16 under the Income Tax Act, 1961 for salary deduction has been issued in India for these employees by the Applicant. d For the purpose of administrative convenience, the quantification of the above salary cost and payment of the same to most of these Expat employees were made from the Head Office s bank acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M, CA and Sh. Hari ganesh V, CA, Authorized representatives of the applicant, appeared for hearing. She Shalin Srivastava, Inspector, Range-Naini-l, Division-I, Allahabad, represented the department in personal hearing. 11). During the course of personal hearing the authorized representative of the applicant reiterated their earlier submissions and also filed some additional submissions, gist of which is as under: - a. The applicant has obtained Permanent Account Number ( PAN ) and Tax Deduction Account Number ( TAN ) in the name of the Head Office, as the applicant is only an extension of the office of Hitachi Power Europe GmbH Germany and not an independent entity. b. For the purpose of execution of projects, certain foreign nationals ( Expat Employees ) who are employees of Hitachi Power Europe GmbH Germany and in turn also the employees of the applicant, have been sent to India, whose TDS deduction on the salaries , issuance of Form-16, payment of Professional Tax and assistance in obtaining employment visa as an Employer , is being done by the applicant. c. The applicant is only an extension of the Head Office and entire fund for meeting its expenses in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it the application for consideration on merits. 15). We observe that the issue before us to decide is- i. Whether the transaction between M/S Hitachi Power Europe GmbH and its project office located at Meja Thermal Power Project, Allahabad is a transaction between same company or a transaction between two distinct legal entities? ii. If the said transaction is an intra-company transaction, whether the amount paid to the expat employees falls under the definition of Supply under GST laws or will it fall under the Schedule III of the CGST Act, 2017 i.e. Services by an employee to the employer in the course of or in relation to his employment. 16). As regard to the first question, we observe that Reserve Bank of India has framed 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, vide Notification No. FEMA 22 (R)/2016-RB dated 31 March 2016. As per the said Notification, a Project Office has been defined as:- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inward remittance from abroad and the project will be funded directly by inward remittance from abroad. This fact is also verified from the fact that in the balance sheet of the Project office, under the shareholder s fund, Head Office balance is mentioned, which shows that project office is receiving funds from their head office. 16.5) From the discussions above, we are in unison with the applicant that a Project Office is merely an extension of the foreign company in India to undertake the project in India and limited to undertake compliances required under various tax and regulatory requirements in India. Accordingly, we observe that the Head Office and project office are the same legal entity and they cannot be treated as different legal entities. We also observe that the project office is merely an extension of Head Office for administrative convenience/ to fulfill legal obligations. 17). Now coming to the second question, as per the details/documents provided by the applicant, we observe that:- i TDS is deducted by the Project Office as an Employer on salaries paid to Expat Employees in accordance with the Income Tax Act, 1961; ii Project Office issues Form ..... X X X X Extracts X X X X X X X X Extracts X X X X
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