Liaison office connecting India biz with Dubai HO, an ‘intermediary’ under GST – The Hindu BusinessLine

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The Authorities for Advance Rulings (AAR) continue to give contrary rulings, with the latest one from Maharashtra. This ruling held the liaison office of a foreign industrial chamber as an intermediary under GST law. This means it will have to get registered in India and pay GST.

Also read: Food items supplied under govt scheme to ITI trainees not to attract GST: AAR

In a ruling dated May 24, AAR replied in the ‘Affirmative’ for all the three queries.

It upheld the jurisdictional officer’s findings that the applicant is not a non-profit organisation, effecting supply of services for a consideration for which it has to obtain GST registration and pay applicable GST on its transactions. It rejected the applicant’s stance that the meaning of commerce is buying and selling of goods and services, especially in large amounts and said that anything which aids trade is covered by the Scope of Commerce. The Authority further said that is an admitted fact that the applicant is covered by scope of commerce.

On the one hand, the applicant has submitted that it is not undertaking any supply, while on the other hand the applicant accepts that it connects business in India with businesses in Dubai, which is supply of services, the Authority observed, adding that the applicant acts as a conduit between some business partners in Dubai and certain businesses in India.

“In the subject case, the applicant calls itself a liaison office and an intermediary called ‘by whatever name’,” AAR said. This satisfied one condition of an intermediary — broker, agent or any person by whatever name called.

Contrary ruling

The present ruling is quite contrary to three other rulings.

Karnataka AAAR in the matter of Fraunhofer-Gessellschaft Zur Forderung said that activities of liaison office located in Bengaluru to carry out activities permitted by the RBI, does not amount to ‘supply of service’ and set aside the AAR ruling which held that liaison activities being undertaken by the appellant amounts to supply under Section 7 of CGST Act and is required to pay GST as well as undertake registration.

Also read: Mutuality principle: Bowring Institute gets AAR reprieve on GST

Similarly, Tamil Nadu AAR in the case of Takko Holding GmbH held that liaison activities undertaken by the applicant while acting as communication channel between the parent company and Indian supplier of goods in line with the condition specified by the RBI’s permission letter does not constitute ‘supply’ under GST law. This order is in line with the Rajasthan AAR’s order in the case of Habufa Meubelen B.V.

Though the ruling of one AAR is applicable on the applicant and concerned jurisdictional officer only, still, it can be used as persuasive matter in similar cases. Therefore, there is a feeling that contrary rulings create a lot of uncertainty.

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