Urgent: How to Handle GST and CTC for Shared HR and Finance Services Between Companies?

Urgent Help Needed for Inter-Organization Service Billing

We have two organizations, and now we are sharing our HR, Finance, etc., with the second organization. Due to dual employability concerns, we thought that we would show that the second organization is taking HR and Finance services from the first organization. Hence, the first organization will raise invoices to the second organization for their HR, Finance, etc., services, and the second company will pay for those services.

Both of the companies' directors are the same. Both of the companies have a GSTIN ID.

Questions Regarding GST and CTC

a) Now, my question is if the first organization is raising an invoice to the second, do we need to include 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.

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

Regarding the amount of work done by one company for another, you may raise an invoice. However, this will only increase administrative work. Why do you wish to do that? A person working in the accounts department will handle the accounts of the sister company. You are not assigning work from an unrelated department like the security department of the sister company.

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

Thanks,

Dinesh Divekar

Sharing of Services Between Group Companies

Sharing of services of personnel between group companies is very much in vogue. It's neither considered as sales nor providing services for 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 that determine the basis for the levy of GST:

1. Buyer and seller and/or service provider and service taker for consideration;
2. Value addition;
3. The status of the employees and so on;
4. Responsibilities and supervision.

There is also an arrangement to avail the services on a 'deputation' basis or sharing of available time. Under this arrangement, the actual cost of personnel is determined based on the time utilized by different group/sister concerns. There is no issue. Since the personnel remain with the parent company 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 a 'reimbursement' basis so that no exigibility 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.