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2021 (9) TMI 949 - AAR - GSTClassification of supply - supply of service or not - managerial and leadership services provided by the Registered/Corporate Office to its Group Companies - lump sum amount charged by the Registered/Corporate Office on its Group Companies - levy of GST under Section 8 of CGST Act, 2017 - related persons or not - charging certain lump sum amount for expenses incurred by Registered/ Corporate Office for supplying the services - method of valuation under Rule 31 of CGST Rules - input tax credit of GST paid. Supply of service or not - HELD THAT:- Section 7(1)(c) of the CGST Act states that the activities specified in Schedule Ito the CGST Act, shall be treated a supply of goods or services, even if made without consideration. As per Schedule I, Entry No. 2, “Supply of goods or services or both between related persons or between distinct persons, as provided in Section 25, when made in the course or furtherance of business will be activities to be treated as supply even if made without consideration - In the subject case the site offices/group companies cannot be treated as persons who are employed by the applicant. The site offices are independent offices separately registered under the GST Laws. Similarly the group companies are also separately registered under the GST Laws and since both the site offices as well as the group companies cannot be treated as employees, the applicant cannot get the benefit of Entry No. 1 to Schedule III. The supply of services by the applicant will be covered under Entry No. 2 to Schedule I and is therefore taxable under GST Laws. Whether the lump sum amount charged on its Group Companies would be liable to GST under Section 8 of CGST Act, 2017? - HELD THAT:- The applicant will have to pay GST on the lumpsum amount charged by them to their Group Companies. Whether the Applicant can continue to charge certain lump sum amount, as has been done in the past, in terms of second Proviso to Rule 28 of CGST Rules, 2017? - HELD THAT:- Applicant may resort to valuation under Rule 28 of the CGST Rules, in respect of transaction with related/distinct persons who are eligible for full input tax credit as per the second proviso to Rule 28 of the CGST Rules, 2017. If the method of charging certain lump sum amount is not permissible, whether the Applicant can adopt the valuation in terms of the provisions of Rule 31 of CGST Rules, 2017, by arriving at a proportional ratio, based on total expenses incurred by Registered/ Corporate Office for supplying the aforesaid services and turnover of each of the distinct and related persons? - If the aforesaid method of valuation under Rule 31 of CGST Rules is also not permissible, whether the Applicant can adopt valuation in terms of Rule 30 of CGST Rules, 2017, by allocating related expenses at the Registered/Corporate Office in a reasonable proportion to the distinct and related persons considering turnover of each of them and adding ten percent, which would be at par with 110% of cost of provision of such services? - HELD THAT:- Since it is held that the applicant may resort to valuation under Rule 28 of the CGST Rules, the said questions are not taken up for discussion. What alternative feasible workable method of valuation can be suggested by this Authority considering the nature of industry in which the Applicant is engaged in? - HELD THAT:- This question does not relate to determination of value of supply of goods or services or both, rather the question is asking this authority to suggest procedures to be followed by the noticee. The question does not fall under the purview of Section 97 of the CGST Act, 2017 and is therefore not answered.
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