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AAAR okays GST on inter-state office services

Karnataka Appellate Authority for Advance Rulings (AAAR) upheld the levy of goods and services tax on services rendered by one office branch to other branches of the same company located in different states.

In its ruling which will affect the companies with a presence in multiple states, the AAAR said that in-house service functions such as human resources and payrolls, if carried out from a centre in one state for offices in other states, will attract GST for which it will have to issue an invoice.

The decision will add the transaction costs and compliance burden for the companies with offices in many states, even though the tax paid can be adjusted against their final GST liability.

The companies that deal in goods or services that are exempt from GST such as healthcare and education, and petroleum and liquor companies, which are out of the ambit of the tax will not have the option of adjusting the tax paid on in-house transfers.

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