§ 1
Structuring the contract for tax
Where title to offshore equipment passes outside India and payment is made outside India, the income from that supply is generally not taxed in India even if the foreign company has a project office. Onshore supplies, installation and services performed in India are taxed as profits of the permanent establishment.
GST applies to supplies made in India, often as a composite works contract. The project office registers in each state where it supplies and charges GST to the client, claiming credit on local purchases. Imports of equipment attract customs duty and IGST, which the right registration lets the office credit.
§ 2
The law that applies
| Income-tax Act, 2025 and tax treaties | PE, attribution of profit, withholding on contract payments and lower deduction certificates. |
|---|---|
| CGST, IGST and State GST Acts | Works contracts, state registrations and input tax credit. |
| Customs Act, 1962 | Import of project equipment, project import regulations where applicable. |
§ 3
Issues and how we solve them
The problems that most often hold up or complicate this work, and how we deal with each.
Issue 1
The client deducts tax on the full contract value, including offshore supplies.
Our approach
We support the split with contract clauses and evidence, and apply for a lower deduction certificate based on projected Indian profit.
Issue 2
GST is not registered in every state where work is done.
Our approach
We map the project sites and supplies, register in the right states and set up invoicing and credit tracking per registration.
§ 4
Process and timeline
- 1
Pre-bid
Before signingTax review of the contract structure and pricing.
- 2
Mobilisation
Weeks 1–4PAN, TAN, GST registrations and lower deduction certificate.
- 3
Execution
MonthlyMonthly GST and TDS, advance tax.
- 4
Annual and closure
Annually · completionTax audit, transfer pricing, return and final assessment.
§ 5
Our scope of work
Included
- Contract tax review
- Registrations
- Lower deduction certificate
- Monthly GST and TDS
- Transfer pricing
- Returns and assessments
§ 6
Questions
Is every project office a permanent establishment?
Most are, because they involve a fixed place or a site in India. Treaties set time thresholds for construction or installation PEs, so a short project may fall outside, depending on the treaty.
Can the project office claim GST credit on imported equipment?
IGST paid on import can be claimed as input tax credit by the registered project office, subject to the normal conditions.
Prepared by CA Utsav Dogra, Chartered Accountant, ICAI M. No. 542375, SU and Company · Last reviewed 4 November 2026. General information only, based on the law as it stood on that date; it is not advice for any particular case.