Liaison offices, branch offices and the permanent establishment overlap
An office that is not allowed to earn income, taxed on services it did not charge for.
A liaison office established with the Reserve Bank of India's approval, which acts as a communication channel and does not undertake any commercial activity, has been held in a line of advance rulings and appellate rulings not to be making a supply where it merely acts as an extension of the head office funded by remittances. A branch office, by contrast, is a distinct person from its foreign head office under the explanation to Section 8 and to Section 13, so services between them are taxable as import or export of services.
Liaison office
The permitted activities are confined by the approval: representing the parent, promoting exports and imports, promoting technical and financial collaborations, and acting as a communication channel. Commercial activity is not permitted.
Where the office does only that, and is funded entirely by inward remittances from the head office, the ruling authorities have generally held there is no supply of service to the head office and no requirement to register.
The position changes where the office does more than the approval permits — negotiating contracts, providing services to Indian customers, or performing functions for the head office that go beyond liaison. Then there is a supply, and the valuation follows.
The evidence is the approval, the activity record, the funding pattern and the absence of any receipt from Indian parties.
Branch office and project office
A branch is an establishment of a distinct person under the explanations to Sections 8 and 13 of the IGST Act. Services received from the head office are an import of services, taxable under reverse charge, and services rendered to the head office are not an export because of the fifth condition in Section 2(6).
That asymmetry is the key exposure: charges from the head office are taxable in India, while services to the head office cannot be zero rated.
Circular 210/4/2024-GST addressed the valuation of services received from a related person outside India where the recipient is eligible for full credit, which reduces the practical exposure for branches with full credit.
A project office executing a contract in India is registered and taxable on its supplies in the ordinary way, and the permanent establishment analysis under the income tax law runs in parallel but is not determinative for GST.
The compliance decisions
Determine the character of the office by reference to the approval and the actual activity, and record the determination.
For a branch, establish the reverse charge process for head office charges, including allocations that are not invoiced.
Do not assume that the income tax permanent establishment conclusion answers the GST question; the tests are different.
Where a liaison office begins to perform functions beyond its approval, the regulatory and the tax consequence arrive together.
Authorities relied on
Clarified valuation of import of services from a related person outside India, including where the recipient is eligible for full input tax credit and no invoice is issued.
What to do on Monday
Record the character of each office against its approval and its actual activity, annually.
Build the reverse charge process for head office charges to Indian branches, including uninvoiced allocations.
Keep the funding and activity record for liaison offices as the evidence of no supply.
Analyse the GST position independently of the income tax permanent establishment conclusion.
This page states the general position. A reader with a specific question on their own facts may write to the GST practice at AMLEGALS.
Write to the GST practiceQuestions we are asked on this
Does a liaison office need to register?
Where it performs only permitted liaison activities and is funded by head office remittances, the ruling authorities have generally held there is no supply and no registration requirement. Document the activity.
Are head office charges to an Indian branch taxable?
Yes, as import of services under reverse charge, with the valuation clarified where the branch has full credit.
Can a branch export services to its head office?
No. The fifth condition in Section 2(6) excludes establishments of a distinct person.
Does an income tax permanent establishment finding decide the GST position?
No. The tests differ and the conclusions can differ.
What if the liaison office signs contracts?
It is then outside its approval, and both the regulatory and the tax consequences follow.
In this cluster
- Place of supply under GST: the full decision tree
- Intermediary services: characterisation, exposure and structuring
- Export of services: the five conditions and where claims fail
- Dharmendra M. Jani: the constitutional attack on intermediary taxation, and where it stands
- Mohit Minerals: ocean freight, composite supply, and the sentence that changed GST federalism
- Import of services and reverse charge under Section 5(3) of the IGST Act
- OIDAR services: registration, compliance and the 2023 amendment
- Bill to ship to transactions and Section 10(1)(b)
- High seas sales, bonded warehouse transfers and Schedule III
- Merchant trade and out and out supplies
GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.