Can salary paid for services by head office to its branch offices in other states attract GST?

With the introduction of Goods and Services Tax (GST) regime in India, the industry and trade has been befuddled as to whether activities performed by the employees at the corporate office (head office or “HO”) of a legal entity, in the course of employment-engagement, are to be treated as “supply” of services and taxed, or otherwise under the Central Goods and Services Tax Act, 2017 (“CGST Act”).

The Karnataka Authority for Advanced Ruling (“KAAR”) in a recent advance ruling in re: Columbia Asia Hospitals Pvt. Ltd. [Advance Ruling No. KAR ADRG 15/2018] ruled that employees in the corporate office or head office (HO) are providing services to the HO, hence there is an employee-employer relationship only with the HO. And by extension, services provided by the said employees for beneficiation of other States’ branch offices (“BO”) of the same legal entity qualify as “supply” by the HO to the respective State BO.