TMI Blog2020 (2) TMI 592X X X X Extracts X X X X X X X X Extracts X X X X ..... ty and the project office is acting as an extended arm of the Head Office. Further the project office is fulfilling all the obligations as employer with reference to expat employees and Employee-Employer relation exist between the project office and expat employees - as the service provided by the expat employees to the project office fall under the category of Services by an employee to the employer in the course of or in relation to his employment - Accordingly, no GST is leviable on the salary paid to the expat employees and reflected in the books of account of the project office. - -- - - - Dated:- 11-9-2019 - Shri Ajay Kumar Misra and Dinesh Kumar Verma, Member ORDER M/s. Hitachi Power Europe GmbH, PO Kodhar, Meja Thermal Power Project, Tehsil - Meja, Allahabad, Uttar Pradesh (hereinafter called the applicant) is a registered assessee under GST having GSTN 09AACCH4870N1Z2. Submission of the applicant : 2. M/s. Hitachi Power Europe GmbH (hereinafter referred as 'Head Office' or foreign company') is a Company incorporated under the Laws of Germany. M/s. Hitachi Power Europe GmbH has been awarded with contracts for supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Power Europe GmbH' under the column 'Organizational Name' with the address of the Project Office in India. (b) The Applicant has deducted Tax Deducted at Source ('TDS') under the head 'Income under Salaries' for these employees under the Income-tax Act, 1961 in India. (c) Form 16 under the Income-tax Act, 1961 for salary deduction has been issued in India for these employees by the Applicant. (d) For the purpose of administrative convenience, the quantification of the above salary cost and payment of the same to most of these Expat employees were made from the Head Office's bank accounts to the employees' bank account outside India. (e) Under the Indian Companies Act, 2013, the Foreign Company is required to prepare its financial statement accounting for all expenses and its corresponding income earned in India from the India Projects. (f) In order to comply with the above requirements, the Foreign Company makes an accounting entry amongst others for the cost of Expat employees' salary cost in its books of account based on the accounting debit note provided by the Head Office. (g) It is importan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained Permanent Account Number ('PAN') and Tax Deduction Account Number ('TAN') in the name of the Head Office, as the applicant is only an extension of the office of Hitachi Power Europe GmbH Germany and not an independent entity. (b) For the purpose of execution of projects, certain foreign nationals ('Expat Employees') who are employees of Hitachi Power Europe GmbH Germany and in turn also the employees of the applicant, have been sent to India, whose TDS deduction on the salaries', issuance of Form 16, payment of Professional Tax and assistance in obtaining employment visa as an 'Employer', is being done by the applicant. (c) The applicant is only an extension of the Head Office and entire fund for meeting its expenses in case of any shortfall is being managed by the Head Office, Thus, the salary for these employees is disbursed by the Head Office directly to the expat employees, who have their primary bank accounts outside India. (d) As per Explanation 2 to Section 8 of the Integrated Goods and Services Tax Act, 2017 (IGST Act, 2017) A person carrying on a business through a branch or an agency or a representational ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntities? (ii) If the said transaction is an intra-company transaction, whether the amount paid to the expat employees falls under the definition of Supply under GST laws or will it fall under the Schedule III of the CGST Act, 2017 i.e. Services by an employee to the employer in the course of or in relation to his employment? 16. As regard to the first question, we observe that Reserve Bank of India has framed Foreign Exchange Management (Establishment, India of a branch office or a liaison office or a project office or any other place of business) Regulations, 2016, vide Notification No. FEMA 22 (R)/2016-RB, dated 31 March, 2016. As per the said Notification, a Project Office has been defined as : 'Project Office' means a place of business in India to represent the interests of the foreign company executing a project in India but excludes a Liaison Office. 16.1 Further, para 4(f) of the said Notification dated 31st March, 2016, defines the conditions for project office, which are as under : (f) A foreign company may open project office/s in India provided it has secured from an Indian company, a contract to execute a project in I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is mentioned, which shows that project office is receiving funds from their head office. 16.5 From the discussions above, we are in unison with the applicant that a Project Office is merely an extension of the foreign company in India to undertake the project in India and limited to undertake compliances required under various tax and regulatory requirements in India. Accordingly, we observe that the transactions between the foreign company and project office is an intra-company affair. 17. Now coming to the second question, as per the details/ documents provided by the applicant, we observe that : (i) TDS is deducted by the Project Office as an Employer on salaries paid to Expat Employees in accordance with the Income-tax Act, 1961; (ii) Project Office issues Form 16 as an Employer to the Expat Employees; (iii) In the VISA issued by the Indian Bureau of Immigration the organizational name of the expat employees has been written as 'Hitachi Power Europe GmbH'; (iv) Professional tax is deducted from the salaries of the Expat employees and paid by the Project Office in India. 17.1 From the foregoing facts, we observe that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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