Mumbai: Karnataka bench GST authority for a Face Decision (AAR) has argued that separate GST registration is not needed in the state (place inventory) by subcontractors who are running infrastructure projects.
Enlighted the spirit of ‘the convenience of doing business’ in its recent verdict, the bench said the subcontractor could improve invoices by charging the goods and integrated service tax (IGST) from his office in Noida, Uttar Pradesh.
IGST is collected if there is a supply of interstate goods and services.
The verdict provided by AAR has persuasive value.
Tax practitioners say that if this decision is adopted by PAN-India, it will run away in reducing costs – both registration fees and other administrative costs for business entities.
On the downside, AAR also argues that in the absence of an office in Karnataka, subcontractors cannot register as a distributor of input services.
The registration is needed to utilize input tax credits on goods / services obtained from suppliers at the location and distribute the credit by registering Noida.
In this case, Indian GEW, a private limited company that has a unit in Noida and the registered office in Pune (Maharashtra), obtained work orders from Larsen & Tubro to carry out work contracts in the naval base in Karwar in Karwar.
This requires the supply of composite goods and services, such as the installation of steel structures to hide the ship.
Steel is made in unit noida and installation in place.
Indian GEW explained that they tend to provide accommodation in Karnataka for resident engineers and other people who can visit work sites, but will not have offices or administrative staff.
Aar noted that the applicant company only has one main business place – Noida, where GST registration has been obtained.
Thus, there are no requirements for separate registration in Karnataka to execute their contract.