I need urgent help on the following topic.
1) We have two organization and we now we are sharing our HR, Finance, etc with the second organization. Now due to dual employability concerns, we thought that we will show that the second organization is taking HR, Finance services from the first organization. Hence first organization will raise invoices to the second organization for their HR, Finance, etc services, and the second company will pay for those service.
2) Both of the company's directors are the same.
3) Both of the companies have a GSTIN ID.
a) Now my question is if the first organization is raising an invoice to the second do we need to put GST?
b) If it attracts GST then do we need to revise our CTC?
I need urgent help on this matter. If possible please explain.

From India, Kolkata
Dear Abhishek Bakshi,

You have mentioned that you have two companies. For both the companies, a few departments like HR and Accounts are common. But then if you keep this arrangement what is the problem? While recruiting the staff in the respective department, you can very well make a job profile wherein they are required to work also for the sister company. You can very well mention in the appointment letter that the administration of the reserves right to allot the work for the sister company. This will lay the matter to the rest.

For the quantum of the work done by either company for another company, you may raise the invoice. However, this will only increase the administrative work. Why do you wish to do that? A person working in the accounts department will handle accounts of the sister company. You are not allocating work of some unrelated department like the security department of the sister company.

The only problem that I foresee in my suggestion is the increase in the expenditure by the first company for having made to work for the sister company. However, since the Directors of both the companies are the same, this arrangement should not have not a problem per see.

Thanks,

Dinesh Divekar

From India, Bangalore
Hi Abhishek,

Sharing of services of personnel by & in-between group companies are very much in vogue. It's neither considered as sales nor providing services on consideration. You are free to determine the formula for sharing the services and how the cost is to be compensated. There are a few things which determine the basis for levy of GST.

1. Buyer & seller and/or service provider & service taker for a consideration;

2. Value addition

3. The status of the employees and so on

4. Responsibilities & supervision

There is also arrangement to avail the services on 'deputation' basis or sharing of time available. Under this arrangement the actual cost of personnel are determined based on the time utilised by different group/sister concerns. There is no issue. Since the personnel remain with the parent co. or the group head the shared services can be performed from wherever convenient. If situated in different places the personnel can be deputed on certain dates as mutually agreed. Their costs are aggregated and shared on 'reimbursement' basis so that no exigiblity of GST would arise. A detailed note is attached giving relevant aspects on various issues concerning. Few things may be different which varies depending on the specifics involved. Hope this will be useful.

From India, Bangalore

Attached Files
File Type: docx SHARING OF EMPLOYEES-GST Implications.docx (28.8 KB, 14 views)

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