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Large companies, banks may have to split top management salaries

Large companies, banks may have to split top management salaries

The Maharashtra bench of the Authority for Advance Ruling (AAR) has said companies must “value” the service provided by the top management and charge it to their branch offices (with a separate GST registration) across India.

Experts said this could create a unique problem for large companies and banks that have several branch offices.

Generally, the salaries of chief executive officers (CEOs) and chief financial officers (CFOs) become expenses only of the head office—where they sit--and not all the branch offices.

However, with the AAR ruling, companies may now have to “cross charge” the common expenses, such as salaries of top management, across the branch offices.

“Under most laws in India, an employee is generally perceived as an employee of the entire organisation/company and not of a particular location. Accordingly, there is a strong view that though CXOs are based out of one state, no service is being provided by them to other branches as they are employees of all branches, i.e. the entire organisation under the same PAN,” said Harpreet Singh, partner, indirect taxes, KPMG, in India.

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