Section 2(50) of CGST Act: Fixed Establishment
(50) "fixed establishment" means a place (other than the registered place of business) which is characterised by a sufficient degree of permanence and suitable structure in terms of human and technical resources to supply services, or to receive and use services for its own needs
A fixed establishment is a
physical location (other than the registered place of business) where a company
conducts its business activities. To be considered a fixed establishment, it
must possess two key characteristics:
- Permanence:
The establishment must have a certain degree of stability and continuity.
It cannot be a temporary or occasional presence.
- Suitable
Structure: The establishment should have adequate human
and technical resources to independently carry out business activities.
Key Points:
- The definition focuses on the physical
presence and operational capabilities of the establishment.
- It distinguishes between a fixed
establishment and a mere representative office or liaison office.
- The concept of fixed establishment is crucial
for determining the place of supply of services under the GST law.
Importance of Fixed Establishment
The concept of fixed establishment is essential for determining the tax liability of a foreign company providing services in India. If a foreign company has a fixed establishment in India, it may be liable to register for GST and pay taxes on its Indian income.