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Fraunhofer-Gessellschaft Zur Forderung der angewwandten Forschung , Germany -Liasion Office
The applicant, incorporated in Germany, undertakes the business of promoting applied research and established their liaison office in Bangalore, India. It acts as an extended arm of the head office and to carry out the activities that are permitted by Reserve Bank of India. In view of this the applicant sought advance ruling in respect of the following questions:-
i. Whether the Activities of a liaison office amount to supply of services?
ii. Whether a liaison office is required to be registered under CGST Act, 2017?
HELD BY AAR:
i. The applicant contends that they are not covered under Section 2(17) (Business) of the CGST Act 2017, by mainly focusing on clause (a) of the said Section. We observe that the impugned liaison activity of the applicant actually falls under clause (b) of Section 2 (17) of CGST Act, 2017 as it is ancillary to the activities mentioned in clause (a) of Section 2 (17) of CGST Act, 2017.
In view of the above, we find that the applicant is involved in the business. Section 15 of the CGST Act 2017, at explanation (c) stipulates that “persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, however described, shall be deemed to be related”. The applicant themselves have admitted that they are involved in promoting the business of the HO in India and they act on behalf of the Head office/HO for its customers in India.
Thus the applicant (LO) and their head office (HO) are deemed to be related persons. We therefore conclude that the activities performed by the applicant falls under the scope of supply under Section 7 of CGST Act, 2017 read with schedule I of CGST Act, 2017 as it is in relation to furtherance of business.
The supply of services by the applicant amount to inter-state supply of services in terms of Section 7(5) of the IGST Act, 2017. Further persons making any inter-state taxable supply shall be required to be registered compulsorily in terms of Section 24 of the CGST Act 2017.