MUMBAI : The headquartered services of companies will henceforth be treated as supplies to branch offices, and GST levies.
The tax department has started issuing notices to companies, including banks, seeking details on how they are passing on some common costs like salaries of chief executives to their branch offices.
The department requires companies to proportionately distribute common costs from head office to branch offices and treat this as a supply. Once this happens, a 10% is to be added to the coast and 18% Goods and Services Tax(GST) would be levied on the total amount.
For instance, if the chief executive officer of a company earns Rs 3 crore per annum, the cost will be cross-charged to other branches and then 18% will be paid on it. A part of Rs 3 crore will therefore be treated as supply of services from the head office to the other branch offices.
Under the GST framework, everything is chargeable including some common functions carried out at a company’s or a bank’s head office like human resource, IT functions, audit and legal fees paid.
