The Authority for Advance Ruling (AAR), Haryana, in an application filed by Wilhelm Fricke SE, has ruled that a Liaison Office (LO) located in India is not required to obtain GST registration and pay GST on reimbursements received from Head Office (HO).

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  • Wilhelm Fricke SE (the applicant) is a company incorporated in Germany, and is inter alia, engaged in the development, assembly/production and sale of agriculture machinery and agricultural machinery spare parts;
  • The applicant established a LO in India (with the permission of the Reserve Bank of India) which undertakes the following activities:
    • Identification of vendors in India, and liaising and coordinating with them;
    • Collection of price quotes from various suppliers and communicating confirmation of order;
    • Preliminary quality check before shipment of goods;
    • Other ancillary activities.
  • All the administrative expenses, including salary expenses of the Indian LO are met by the HO. No separate consideration/fee is charged from HO through any tax invoice/debit note.


  • Whether the reimbursement of expenses and salary paid by Wilhelm Fricke SE, Germany to the LO is to be considered as supply of services under the GST law?
  • Whether the LO is required to get registered under GST?

Applicant’s contentions

  • The LO does not charge any consideration and does not have any business activities of its own as specified by conditions imposed by RBI. In the absence of consideration, the activities of the LO cannot be treated as ‘supply’ under Section 7 of the CGST Act;
  • Schedule I of CGST Act states that supply of services between related parties or distinct persons as per Section 25, even without consideration, constitute a supply when made in the course or furtherance of business. However, the LO is just an extension of the German company. Therefore, they are not a distinct entity, as LO is not a separate legal entity.


  • The LO does not have any other source of income, and it is solely dependent on the HO for all the expenses incurred, which are reimbursed by the HO. Therefore, the HO and LO cannot be treated as separate persons;
  • Since HO and Liaison Office cannot be treated as separate persons, there cannot be a flow of services between them as one cannot provide service to self;
  • Further, the liaison office is strictly prohibited from undertaking any activity of trading, commercial or industrial nature, or entering into any business contracts in its own name;
  • Therefore, the applicant is not required to get the LO registered under GST, and is not liable to pay GST on reimbursements received from the HO.

Remember, this is along with the fact that In re Fraunhofer-Gessellschaft Zur Forderung Der Angewwandten Forschung GST AAR Karnataka with a Contradictory ruling held that the definition of person under Section 2(84) is very wide in scope and covers every artificial juridical person including Liaision Office.

Earlier, the GST law was amended to introduce the National Appellate AAR for giving a final ruling in case of contradictory advance rulings in different states, in case of the same entity. However, the said authority is yet to be constituted.

The government should expedite the constitution of the National Appellate AAR and also look into the possibility of empowering it to grant rulings even in cases where contradictory rulings exist for different entities. This may ensure that more number of taxpayers are eligible to approach it to obtain clarity.

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