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GST impact on cost sharing agreement between two companies. Advice


17-Dec-2023 (In GST Law)
Indian Private limited company carrying on machine manufacturing business has German company as an investor with 60 % holding ( who is also technology provider with Royalty to Indian Company) Now, under cost-sharing arrangement German company is going to reimbursement Salary of Indian staff as actual and 50% of Rent and Marketing expense on an actual basis to Indian company every month (motive behind arrangement is to help Indian company market in initial years) whether Indian company required to charge GST on expenses while claiming such reimbursement?
Answers (2)

Answer #1
616 votes
1 .Yes , Indian company requied to charge GST on expenseswhile claiming such reimbursement , if the threshold limit exceeding beyond the relevant laws of Goods & Services Tax . 2. It is depends upon the how much expenses while claiming of such reimbursement .
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Advocate Abhay Rajesh Gupta

Adv. Abhay Rajesh Gupta

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Answer #2
723 votes
Dear Sir, As per the facts narrated by you, it is established that the foreign company is going to reimburse the expenses to indian company, which is straight away falling under Section 9(3) of CGST Act and the relevant provision of IGST Act. Therefore, indian company being a service receiver located in India is likely to pay IGST on the reimbursable amount. however, it is revenue neutral exercise and therefore can claim Input Tax Credit of the IGST amount paid by them. No ITC to be utilised for the payment of IGST by indian company and once the IGST is paid the same amount can be credited to their Electronic Credit ledger. in case of further clarification you can give other details also, if deems fit. the above views recorded by us is the understanding and knowledge by us of GST laws and therefore should not be taken as binding in nature.
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Advocate Vidyadhar Apte

Adv. Vidyadhar Apte

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