Karnataka HC Judgement on GST and Holding Shares of Subsidiary Companies
The petitioner challenged notification no.11/2017-Central Tax (Rate): SAC 997171, as ultra vires. The contention was that the act of a holding company owning shares in a subsidiary company should not be treated as a supply of services under GST.
According to Circular No. 196/08/2023-GST issued by the Central government and state government clarified that mere holding of shares by a holding company in a subsidiary company cannot be classified, treated or construed as “supply of service” as clearly clarified and confirmed by the aforesaid Circulars by both the Central Government and the State Government.
An order issued by the revenue against the petitioner, which proceeded on the basis that holding of shares amounts to “supply of service”, was deemed clearly illegal, arbitrary, and without jurisdiction. Thus, it was quashed.
This decision is in favor of the petitioner and sets a precedent for similar cases. It provides clarity on Section 7 of the Central Goods and Services Tax Act, 2017/Karnataka Goods and Services Tax Act, 2017.
Yonex India (P.) Ltd. vs Union of India [ WP No. 2301 of 2023]
The copy of the order is as under:
