Supply of Services – Involvement of Employee

It is possible that the employees of the HR Department at the Head Office hiring personnel for branches. It is also possible that the employees at the branches carry out liasoning work and procure orders. Goods against such orders are directly dispatched to the customer from the factory.

Entry No. 1 of Schedule III to the CGST Act, 2017.


[See Section 7]

Activities or Transactions Which Shall Be Treated Neither as A Supply of Goods nor A Supply Of Services

Entry No. 1 Services by an employee to the employer in the course of or in relation to his employment.”

Now the Question arises whether Is branch of a company not an employer when it directs an employee sitting at the Head Office to do some work or Vice Versa?

As per general terms: – Head office and the branches are covered within the phrase “employer” and hence irrespective of where the employee is based.

Issue raised by Department in M/s. Columbia Asia Hospitals Pvt. Ltd

Since the Corporate office and its other units registered in other States are distinct persons as per Section 25(4) of the CGST Act, the employees in the HO have no employee-employer relationship with the other distinct offices. The services provided to the corporate office by the persons working in the corporate office are in the nature of employee-employer relationship. Since the corporate office and the units are distinct persons under the Act, there is no such relationship between the employees of one distinct entity with another distinct entity as per the GST Act, even if they are belonging to the same legal entity.

Case Summary

In short, we can say that services of employees, when rendered in the course of their employment are not considered as a ‘supply of service’ in terms of entry I to Schedule III. However, when the services of employees are benefiting other distinct persons, then such services of employees will be considered as a ‘supply of service’ by one distinct person to another. The employee-employer relationship is to be viewed separately for every registered unit of the business entity.

Points to be considered in parlance of Employer-Employee Transactions

1. If an employee got employment from HO and salary and all other activities related to employment is also done by HO. But he/she is stationed at interstate branch and doing branch jobs only. In that case also whether HO have to raise tax invoice of employee salary and charge GST from branch or vice versa.

2. If an employee got employment from HO and salary and all other activities related to employment is also done by HO. But he/she is stationed at interstate branch doing HO working (Compiling data etc). In that case also whether Branch have to raise tax invoice of employee Sitting arrangement and other services provided and charge GST from HO or vice versa.

The term ’employer’ has not been defined under GST Act. However, in common parlance an employer means “a person or entity which hires the services of another”; that in the instant case, the employee shall work as per the directions of the Company whether he is located at the HO or at any of the branch offices located in other States; that normally appointment letter is written in the name of a company as a whole and not on a GST registration basis.

Now the question arises, to decide whether the employee services belongs to which branch office or the HO, companies have to enter into employment contract on GST basis rather than in the name of company.


The information provided above by Team of “GST Tax Mantra” does not, and is not intended to, constitute legal advice; instead, all information, content, and materials are for general informational purposes only.

Complied by- GST Tax Mantra, 2394-Sector-46, Gurgaon, 0124-4561154

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  1. KAILASH GOYAL says:

    THIS IS NOT EASE OF DOING BUSINESS AND SUCH TYPE OF PROVISIONS are very subjective and will create lot of issue . business community will involve in compliances only and growth of country will be affected .

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May 2021