No IGST on HO to BO Services Without Cross-Charge if Full ITC Available | HC

Case Detaiuls: KEI Industries Ltd. vs. Union of India - [2025] 174 taxmann.com 1205 (Delhi)

Judiciary and Counsel Details

• Pratibha M. Singh & Rajneesh Kumar Gupta, JJ.
• V. Lakshmikumaran, Yogendra A., Kund Kapoor & Ms Purvi Sinha, Advs. for the Petitioner.
• Kshitij Chhabra, Senior Panel Counsel, Shlok Chandra, SSC & Ujjwal Jain, Advs. for the Respondent.

Facts of the Case

The petitioner challenged an Order-in-Original passed by the jurisdictional officer under CGST, demanding IGST on services allegedly rendered by the petitioner’s Head Office (HO) to its Branch Offices (BOs) without cross-charging. The petitioner submitted that no IGST was payable since no cross-charges were made and the BOs were eligible to claim full Input Tax Credit (ITC). The petitioner relied upon Circular No. 199/11/2023-GST, dated 17-07-2023, issued by the CBIC, which clarifies that where no invoice is issued and the recipient is eligible for full ITC, the value of supply should be deemed nil under the second proviso to Rule 28 of the CGST Rules (also applicable to Delhi GST Rules).

Further, the petitioner referred to the judgment in Metal One Corporation India Pvt. Ltd. v. Union of India, wherein it was held that absence of invoice issuance and a deemed nil value preclude GST demand. The matter was accordingly placed before the Hon’ble High Court for adjudication.

High Court Held

The Hon’ble High Court held that the department failed to consider the CBIC Circular No. 199/11/2023-GST, dated 17-07-2023, and the precedent set in Metal One Corporation India Pvt. Ltd. v. Union of India, both of which establish that where no invoice is issued and full ITC is available to the recipient, the taxable value for intra-company services should be deemed nil.

The Court observed that internal cost components, including salaries of HO employees, need not be included in the valuation for GST purposes under such circumstances. Consequently, the impugned IGST demand was found unsustainable and was set aside. The matter was remanded back to the jurisdictional officer under CGST for reconsideration in light of the Circular and the judicial precedent.

List of Cases Reviewed

• Metal One Corporation India Pvt. Ltd. v. Union of India [2024 DHC 8298-DB] [para 10]followed