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No GST is leviable on the salary paid to the expat employees and reflected in books of account of the project office.

Supply under GST The following question has been posted by the applicant, in its application dated 31-7-2019 (received by the Authority on 14-8-2019), before the Authority :-

Whether the Goods and Services Tax is applicable on the accounting entry made for the purpose of Indian accounting requirements in the books of account of Project Office for salary cost of Expat employees?

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.

We observe that the project office and the head office are single business entity 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".

Accordingly, in view of the forgoing paras we observe that 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. — Hitachi Power Europe Gmbh, In Re… [2019] 16 TAXLOK.COM 221 (AAR-UP)

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