By Mr. Vikash Agarwal
Certain intra group services (IGS) are being claimed to be in the nature of stewardship functions meaning thereby that these are those activities that are performed towards safeguarding or administering the investment that is made by the holding entity.
Once the IGS partakes the nature of stewardship function, no output GST is being paid. However, considering the fact that these activities involved certain input services on which ITC had been claimed, is their any need to reverse it?
Recently, Hon’ble Court of Appeal in a like transaction has held the following:
– The CoA applied the “either/or” test which requires a direct and immediate link between the input transactions and either a specific output transaction or the overall economic activity of the taxable person
– The CoA rejected the argument that the sale of shares was a fund-raising transaction that should be disregarded for the purpose of the direct and immediate link test, and that the input tax should be treated as overheads
– Instead the CoA held that the inputs might be attributable to overheads if there was no direct and immediate link with the share sale
– Accordingly, the CoA disallowed the ITC on the services purchased by the holding in connection with the sale of shares in the subsidiary
A subsequent question that may need an answer if reversal is required let’s say, what would be the point in time of such reversal if there is no sale of shares happening during any tax period, should it be periodic (and on what basis) or only once there is a disposal?
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