GST applicable on credit card expenses incurred by employees of MNCs’ India arms, rules AAR

Credit card expenses incurred by employees of an Indian subsidiary are set to come under the Goods and Services Tax (GST).

In a recent ruling by Tamil Nadu Appellate Authority for Advance Ruling (AAR) it was ruled that any expenses incurred by Indian employees and then claimed from the holding company should be taxed under GST.

AAR ordered the levy of GST on reimbursement of expenses to the Holding Company. The payment on behalf of subsidiary company amounts to advance consideration towards services provided by the subsidiary company, AAR ruled.

The case pertained to ICU Medical India LLP, a subsidiary of ICU Medical Inc.

As per the details of the case, the holding company had provided credit cards to employees of the subsidiary for incurring business-related expenses within and outside India. The Indian arm would then claim these as part of reimbursements from the holding company.

The question was whether GST is applicable on such reimbursements.

AAR ruled that the holding company is providing credit services to the Indian arm for furtherance of business which falls under the definition of Supply under GST. Further, the said services qualify as import of services and therefore the subsidiary is liable to pay 18% GST.