Cross-charges a disaster for multi-state registration holders

- Sales Tax - Soham Mashruwala

Under the GST Act, the government frequently brings amendments and additions. If there is any mistake on the part of the supplier, the authority recovers the amount from the supplier, but if the GST portal fails and the supplier fails to fill the form, no relief is given. To top it all off, there is a very peculiar provision under the GST Act regarding common expenses and services provided by head office to various branches in case of companies having GST registration number in more than one state.

The tendency to collect GST from all sides will disrupt the economic system and adversely affect business. In the last GST Council meeting, a decision was contemplated that there would be no need to take numbers in different states. A registration with a state has been forgotten. The provision of cross charge in multi state GSTIN for entities which are not eligible for tax credit such as electricity company, gas distribution company and companies involved in non GST or exempt supply has raised a lot of controversy. In today's article Tamil Nadu A.A.R. Provided by ProfiSolutions Pvt. The opinion given in (Application No. 32/2022) has been discussed.

FACTS AND COMPLAINTS OF THE APPLICATION

The head office of the applicant company is located in the state of Karnataka and the branch office is located at Chennai. The applicant provides engineering services for industrial and manufacturing projects. The branch at Chennai provides account services, engineering services etc. to the head office. Any employee appointed by the company. It is not separate and fixed for any particular branch or head office. The question raised by the petitioner is whether any service provided by a branch located in one State to the head office located in another State using the advance ruling authority or common employees is liable to pay GST?

Opinion of Authority

In view of Section 7 (1) (c) of the CGST Act, and Section 5 (1) of the IGST Act and Sections 15 and 25 of the CGST Act and above entry No. 2 of the CGST Act, the Authority has held that such transaction is deemed to be a supply because the branch and head office According to section 25, a distinct person is considered and the service of a common employee between the branch office and the head is considered taxable service on which GST is payable. This transaction is treated as a cross charge and the liability of GST is imposed. The government itself cannot share the burden of GST between the Center and the states to collect the amount from such a provision. This provision must be declared unconstitutional.