Maharashtra Authority for Advance Ruling (‘AAR’) in the case of M/s B.G. Shirke construction Technology Pvt. Ltd. has ruled that Managerial or leadership services provided by the head/ corporate office to its group of Companies and branches are taxable in the hands of head/ corporate office as service provided to distinct entities/related persons. Captioned ruling has been analyzed in this update.


  • The Applicant is in business of civil construction and has its registered office in Pune, Maharashtra.
  • It has construction sites in different states & holds separate GST registrations in each state and has ISD registration.
  • All services related to leadership/ managerial services are being made from registered/corporate office located in Pune, Maharashtra.
  • Above services rendered from corporate office are received by all the locations having separate registrations in other states.

3d illustration Business Network with gst rupee

B. QUESTIONS BEFORE THE AAR (relevant extracts)

  • Whether the managerial and leadership services provided by the Registered / Corporate office to its group companies can be considered as “supply of service”, in terms of Section 7 of CGST Act, 2017?
  • If yes, then whether the lumpsum amount charged would suffice or valuation need to be carried out as per rule 30 or 31 of CGST rules considering the fact that most of recipients are eligible for full ITC?


  • Applicant has provided that the services rendered by group/site employees are not taxable as services rendered by employee to its employer are outside the ambit of GST as provided under Entry No 1 of Schedule III of CGST Act, 2017.


  • Section 7(1) (c) of CGST Act,2017 read with entry No 2 of schedule 1 provides that goods or services rendered without consideration to related/distinct persons would be considered as “Supply”.
  • Section 25(4) provides that “A person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act.


  • In such case, the site/group companies cannot be treated as persons who are employed by the applicant. The site office and group office are separately registered under the GST laws. Both the site office employees and group office employees cannot be treated as employees of group company alone. Thus, applicant cannot get the benefit of Entry No 1 to schedule III and therefore taxable under GST laws.
  • Based on the above provisions, it can be concluded that leadership/ managerial services rendered by corporate office to other GSTIN’s (having same PAN) are “supply” of services.
  • The value to be adopted is specifically provided under Rule 28 of CGST Act,2017. In case recipient is eligible for ITC, any value declared by supplier would be considered as taxable value as provided under 2nd proviso to rule 28.

Y. Our comments

AAR resonates the view that provision / usage of services rendered by employees of one GST registration to another would qualify as a supply. Similar view was also taken in the ruling of Columbia Asia Hospitals Pvt. Ltd in which it was ruled that the activities performed by the employees at the corporate office in relation to centralized functions such as accounting and other administrative and IT system maintenance for the units located in the other states shall be treated as supply and GST would be chargeable on all such services.

The above ruling would majorly impact the conglomerates in India as it will lead to levy of 18 per cent GST on the inter-company services in the form of managerial and leadership services irrespective of whether consideration has been charged for the same or not. Though there is merit in the argument that leadership/ managerial employees are for the whole legal entity and does not belong to any office in particular. Further since, the services by employee to employer is outside the preview of GST, requirement to cross-charge salary costs is unwarranted. In view of aforesaid ruling, it is imperative for the government to clear the air through clarificatory circular.


(Author can be reached at [email protected] or [email protected])

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Qualification: CA in Practice
Company: SNR & Company
Location: Delhi, Delhi, India
Member Since: 12 May 2017 | Total Posts: 17
He has been practicing in the field of Income Tax, Service Tax, VAT, GST, Corporate Laws, FEMA for past 18 years and have got vast exposure in these areas. He has advised a number of international and domestic companies on a range of tax and regulatory issues. He is Senior Partner of SNR and Comp View Full Profile

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October 2021