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2021 (2) TMI 1164 - AAAR - GSTSupply of services or not - activities of a liaison office - requirement of registration of liaison office - liability of liaison office to pay GST - HELD THAT:- Establishment of a liaison office in India by foreign entities is regulated in terms of Section 6(6) of the Foreign Exchange Management Act (FEMA), 1999. The FEMA defines Liaison Office as “a place of business to act as a channel of communication between the Principal place of business or Head Office by whatever name called and entities in India but which does not undertake any commercial / trading / industrial activity, directly or indirectly, and maintains itself out of inward remittances received from abroad through normal banking channel”. A body corporate incorporated outside India (including a firm or other association of individuals) desirous of opening a liaison office in India has to obtain permission from the Reserve Bank of India under the provisions of FEMA, 1999. In this case, the Appellant has been granted permission by RBI vide letter dated 11-06-2014 to act as a liaison office for its Head office in Germany. We find from the records that the parent company in Germany is engaged in promoting applied research and development for the benefit of industry and society. The RBI permission has been obtained to set up a liaison office in Bangalore. As per the RBI permission, the liaison office shall undertake only permissible activities as mentioned in Schedule II of FEMA Notification No 22/2000 RB dated 3rd May 2000 as amended - The RBI permission is subject to the condition that the liaison office will not generate income in India and will not engage in any trade/commercial activity. Annexure I to the RBI permission dated 11-06-2014 lists out the terms and conditions for approval of establishing the liaison office in India. Since the parent company in Germany and the Appellant in India cannot be treated as separate persons but as one legal entity, the liaison activity performed by the Appellant for the parent company is in the nature of a service rendered to self A service rendered to oneself does not come within the purview of 'supply' under GST. Therefore, the activities of the Appellant as a liaison office does not amount to a supply of service. The activities of the liaison office are not a 'supply' under Section 7(1)(a) of the CGST Act and will also not be covered under the ambit of clause 2 of Schedule I of the said Act. Requirement of registration under GST - HELD THAT:- Section 22 of the CGST Act mandates that every supplier who makes a taxable supply of goods or services or both, whose aggregate turnover in a financial year exceeds ₹ 20 lakhs is required to be registered in the State from where he makes the taxable supply. The term 'taxable supply' is defined in Section 2(108) of the CGST Act to mean a “supply of goods or services or both which is leviable to tax under this Act” - the activities of the liaison office do not amount to a 'supply' under GST. Hence, there is no taxable supply and there is no requirement for obtaining a GST registration or payment of GST. When the liaison office is not required to be registered under GST, the question of whether they are a distinct person or establishment of distinct person is irrelevant.
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