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The India Management Office (IMO) of the Appellant is providing a service to its other distinct units by way of carrying out activities such as accounting, administrative work, etc with the use of the services of the employee working in the IMO, the outcome of which benefits all the other units and such activity is to be treated as a taxable supply in terms of the entry 2 of Schedule I read with Section 7 of the CGST Act

Shanti Prime Publication Pvt. Ltd. Supply of Service — The short point for determination is whether the Services rendered by the employees at the Corporate office of the Appellant (India Management Office) in the areas of accounting, administrative work and IT system maintenance, which benefits the Appellant’s units in other parts of the country, will be treated as a ‘supply, as per entry 2 of Schedule 1 of the CGST Act.

The AAR held that the services of the employees at the Corporate office which benefit the other units of the Company will be treated as a supply of service in terms of entry 2 of Schedule I of the CGST Act In the course of its discussions, the AAR observed that there is an employee-employer relationship only with respect to the IMO and the services of the employees at the IMO. No such relationship exists between the employees at the IMO and the other units of the Company which are distinct units in terms of Section 25(4) of the CGST Act and hence entry 1 of Schedule III will not apply.

In their appeal before us against the above ruling, the Appellant argued that the functions of the employee cannot be restricted to employment with the registered person merely on account of the location from where he renders his employment services; that the employment relationship exists between the employee and employer i.e legal entity and not confined to the location of registered person; that the organization as a whole is to be treated as an employer and not a particular branch. Therefore, the Entry I of Schedule III applies in their case and the AAR ruling is required to be reversed.

Held that—
we uphold the Ruling dated 27.07.2018 passed by the Karnataka Authority for Advance Ruling as under:

The India Management Office (IMO) of the Appellant is providing a service to its other distinct units by way of carrying out activities such as accounting, administrative work, etc with the use of the services of the employee working in the IMO, the outcome of which benefits all the other units and such activity is to be treated as a taxable supply in terms of the entry 2 of Schedule I read with Section 7 of the CGST Act.Columbia Asia Hospitals Pvt. Ltd., In Re…. [2018] 7 TAXLOK.COM 050 (AAAR-Karnataka)