New Delhi, May 17 (IANS): Credit card expenses made by employees of an Indian subsidiary for furtherance of business here would come under the purview of Goods and Service Tax (GST) with applicable 18 per cent rate.

According to a recent ruling by Tamil Nadu Appellate Authority for Advance Ruling (AAAR), any expenses made by employees of an Indian subsidiary of a multinational corporation that is later reimbursed by the overseas holding company qualifies as service and hence needs to be taxed under GST here.

The AAAR termed reimbursement of credit card expenses made by employees of Indian subsidiary by the overseas holding company as advance for any such service extended by its Indian operations. As business services are taxable, so such expenses would attract 18 per cent tax.

The AAAR ruling came on case concerning ICU Medical India LLP, a subsidiary of ICU Medical Inc.

Apparently, the holding company had provided credit cards to the employees of its Indian subsidiary for business expenses that were required to be made in India and abroad. Any such expenses made was later reimbursed by the holding company.

The AAAR termed such transition to qualify as supply of service. Further, the said services qualify as import of services and therefore the subsidiary is liable to pay 18% GST.

The AAAR ruling would set the precedent for applicability of GST on all such similar transaction between the parent overseas entity and its Indian subsidiary.