Requirement for obtaining GST registration for Business Facilitator

[Shailesh Chechani]

Dear Sir/Madam,

I have a query regarding the requirement for obtaining the GST registration for a Business Facilitator (BF) or Business correspondent (BC) providing services to the banking company.

Facts of the case-

ABC shared service limited (hereinafter referred as 'ABCSSL') is providing support services to ABC Bank limited (hereinafter referred as 'ABC Bank', 'Bank') & wholly owned subsidiary of the Bank. The services includes field work visits, Lead generation, loan application processing, SHG nurturing, NPA recovery etc. The ABCSSL has GST registration in only 4 states & operates centrally to provide services to ABC Bank. However, the bank has GST registration PAN India & employees of ABCSSL visits each state for providing services. During field visit, it is understood that the ABCSSL employees access the ABC Bank branches for collection and submission of documents in relation to different products. However, there is no permanent establishment of ABCSSL in such states. ABC Bank do not charge any lease/rental charges/GST to ABCSSL for access or usage of any such premises. 

Query-

1. Whether ABCSSL is required to take GST registration in all such states where their employees go on field visit and provide services to ABC Bank and its branches ?

2. If there is no requirement to obtain GST registration in all such states than how invoicing will be done for such transaction as the taxpayer have to take care of section 2(71) of CGST Act, 2017 that defines about 'location of the supplier of  services'  before issuing invoice.

3. For services provided by BF the RCM liability is arise on the Banking company & hence liability will be paid by ABC Bank only than there is no requirement of obtaining the GST registration for ABCSSL as they are involved in providing BF & BC services only. Please correct me if my understanding is wrong.

Your response to the above queries would be appreciated. Thanks.

[YAGAY andSUN]

Re: GST Registration Requirement for ABC Shared Service Limited (ABCSSL) Providing BF/BC Services to ABC Bank

ABCSSL, a wholly owned subsidiary of ABC Bank, is providing Business Facilitator (BF)/Business Correspondent (BC) related services such as field visits, lead generation, SHG nurturing, NPA recovery, and document handling across multiple states. Though it holds GST registration in only 4 states, it provides services PAN India through its employees visiting bank branches. There is no fixed establishment or lease arrangement in the visited states.

As per Section 24(i) of the CGST Act, 2017, any person making inter-state taxable supplies is mandatorily required to obtain GST registration, irrespective of turnover. Since ABCSSL’s employees perform services in states where the company is not registered, these activities qualify as inter-state supplies.

The term “location of the supplier of services” under Section 2(71) read with Section 2(85) and 2(50) clarifies that only a fixed establishment with sufficient degree of permanence qualifies for determining supplier location. Temporary presence of employees in a bank’s premises, without infrastructure or lease rights, does not constitute a fixed establishment. Thus, ABCSSL’s principal place of business or registered premises will continue to be treated as the location of the supplier for invoicing purposes.

Although the services fall under the Reverse Charge Mechanism (RCM), as notified under Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017, and tax is payable by the banking company, this does not exempt ABCSSL from obtaining GST registration in the states where services are delivered. RCM affects tax payment, not registration obligation.

Invoices must be raised from the principal place of business (bearing the registered GSTIN) and should reflect the correct place of supply under Section 12(2) of the IGST Act, 2017, considering that the recipient (i.e., ABC Bank) is located in another state.

In conclusion, ABCSSL must obtain separate GST registrations in each state where it renders services through physical presence of personnel. Non-compliance may attract penal consequences under Sections 122–125 of the CGST Act.

[Shailesh Chechani]

Hello  YAGAY andSUN,

Thank You for your value able insights.

I want to know if the above supply is considered as inter-state supply than the ABCSSL can raise invoice from the HO also to the respective state of the ABC Bank to whom they had provided the services. 

As you mentioned that the  "Temporary presence of employees in a bank’s premises, without infrastructure or lease rights, does not constitute a fixed establishment. Thus, ABCSSL’s principal place of business or registered premises will continue to be treated as the location of the supplier for invoicing purposes." i.e. the HO or other registered state of the ABCSSL.

Please let me know if my understanding is correct. Thanks.

[YAGAY andSUN]

ABCSSL is not required to obtain GST registration in each state where its employees undertake field visits for providing BF/BC services to ABC Bank, as such presence does not constitute a “fixed establishment” under Section 2(50) read with Section 2(71) of the CGST Act, 2017. Invoices can be validly issued from the registered principal place of business or any other registered location of ABCSSL, indicating the recipient bank’s state as the “place of supply,” thereby treating such transactions as inter-state supplies liable to IGST under Section 12(2) of the IGST Act, 2017. The applicability of reverse charge under Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017 does not dispense with registration requirements, but where services are provided solely under RCM without fixed establishment in other states, additional GST registrations are not warranted.

AI Summary

Temporary employee visits without fixed infrastructure don't require state-wise GST registration for service companies A shared service company providing business facilitator services to its parent bank across multiple states questioned GST registration requirements. The company holds registration in only four states but employees visit other states for field work, lead generation, and document collection without permanent establishments. Legal experts clarified that temporary employee presence without fixed infrastructure doesn't constitute taxable establishment requiring state-wise registration. Services can be invoiced from registered headquarters as inter-state supplies under reverse charge mechanism, with tax liability on the recipient bank.