Service tax on expenses towards sharing of Employees and infrastructure of other company

[Shailesh Mehta]

A company 'A' utilizes services of employees and infrastructure of Company 'B' and in turn reimburse the actual cost to the company 'B'. Is company 'B' liable to pay Service tax on the amount received from 'A'.

[KASTURI SETHI]

As per category mentioned in the Issue ID, your query is about applicability of GST and NOT Service Tax.

(1)In this scenario, the services of employees are benefiting other distinct persons. Hence such services of employees will be considered as a ‘supply of service’ by one distinct person to another. Company B is liable to pay GST. This activity is covered under Section 7(1)(c) of CGST Act read with Entry No.2 of Schedule-1.

SCHEDULE-1

2. Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business :

The following case law will help in arriving at correct decision. The concept is clearer by the decision of AAAR-Karnataka reported as 2019 (20) GSTL. 763 (App.AAR-GST) Applicant : Columbia Asia Hospital Pvt. Ltd. = 2018 (12) TMI 1604 - APPELLATE AUTHORITY FOR ADVANCE RULING, KARNATAKA

[KASTURI SETHI]

This transaction also conforms to the definition of 'supply' provided under Section 7 of CGST Act.

[Ganeshan Kalyani]

On service tax there was case law on deputation of staff to associate company service tax not applicable.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

You are right if deputation of staff is within group company, it is exempted from Service Tax. Relevant period is also to be considered.

[YAGAY and SUN]

If query is related to Service Tax regime then no service tax is applicable.

AI Summary

Supply of service: reimbursements for shared employees and infrastructure attract GST when parties are distinct persons.
Reimbursement for use of employees and infrastructure between distinct persons is a supply of service liable to GST, as falling within the definition of supply and the entry treating supplies between related or distinct persons in the course or furtherance of business; under the prior Service Tax regime, intra-group staff deputation could be exempt depending on the period and facts.