Sub : Clarification regarding taxability of services provided by an office of an organisation in one State to the office of that organisation in another State, both being distinct persons- Reg.
Ref : Circular No.199/11/2023-GST, dated 17.07.2023 issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs.
Various representations have been received seeking clarification on the taxability of activities performed by an office of an organisation in one State to the office of that organisation in another State, which are regarded as distinct persons under section 25 of Andhra Pradesh Goods and Services Tax Act, 2017 (hereinafter referred to as 'the APGST Act'). The issues raised in the said representations have been examined and to ensure uniformity in the implementation of the law across the field formations, the Chief Commisioner, in exercise of his powers conferred under section 168(1) of the APGST Act hereby clarifies the issue in succeeding paras.
2. Let us consider a business entity which has Head Office (HO) located in State-1 and a branch offices (BOs) located in other States. The HO procures some input services e.g. security service for the entire organisation from a security agency (third party). HO also provides some other services on their own to branch offices (internally generated services).
3. The issues that may arise with regard to taxability of supply of services between distinct persons in terms of sub-section (4) of section 25 of the APGST Act are being clarified in the Table below: -
However, as per the present provisions of the APGST Act and APGST Rules, it is not mandatory for the HO to distribute such input tax credit by ISD mechanism. HO can also issue tax invoices under section 31 of APGST Act to the concerned BOs in respect of common input services procured from a third party by HO but attributable to the said BOs and the BOs can then avail ITC on the same subject to the provisions of section 16 and 17 of APGST Act. In case, the HO distributes or wishes to distribute ITC to BOs in respect of such common input services through the ISD mechanism as per the provisions of section 20 of APGST Act read with rule 39 of the APGST Rules, HO is required to get itself registered mandatorily as an ISD in accordance with Section 24(viii) of the APGST Act.
Further, such distribution of the ITC in respect a common input services procured from a third party can be made by the HO to a BO through ISD mechanism only if the said input services are attributable to the said BO or have actually been provided to the said BO. Similarly, the HO can issue tax invoices under section 31 of APGST Act to the concerned BOs, in respect of any input services, procured by HO from a third party for on or behalf of a BO, only if the said services have actually been provided to the concerned BOs.
4. It is requested that suitable trade notices may be issued to publicize the contents of this circular.
5. Difficulty if any, in the implementation of this circular may be brought to the notice of the Chief Commissioner.
M Girija Shankar I A S
Chief Commissioner