Group Finance
Intra-Group Services and Management Fees: A Practical Guide for Indian Business Groups
By ATTPL HOLDCO / ATTPL GROUP Editorial Team · · 3 min read
How Indian business groups can charge for shared services and management support between companies — agreements, pricing methods, GST, TDS and documentation explained simply.
Why groups charge each other
In many business groups, the holding company or one operating company provides services to the others — accounts, HR, IT, legal, procurement or leadership time. If these costs stay in one entity, its profits look worse than they really are and the others look better. Charging for the services fairly shows the true performance of each business, supports bank and investor conversations, and keeps tax positions defensible.
The key is to charge only for real services, at a price that can be explained, under a written agreement.
Start with a clear service agreement
Every recurring intra-group service should be backed by a written agreement between the two entities. It should set out:
- The services provided and the service levels expected
- How the charge is calculated — cost, cost plus a mark-up, or a fixed fee
- Invoicing frequency, payment terms and taxes
- Records each party will keep to show the services were actually delivered
- Term, review and termination clauses
Agreements between related parties also need the approvals required under the Companies Act, 2013. Our guide on related party transactions in group companies explains the governance steps.
Choosing a pricing method
Most groups use one of three approaches. Direct cost recharge passes on the actual cost of a person or system used by another entity. Cost allocation spreads a shared cost using a sensible key — headcount for HR, number of invoices for accounts, number of users for IT. A cost-plus fee adds a reasonable mark-up where a service is a genuine business activity of the provider.
Whatever you choose, apply it consistently, document the allocation key and keep evidence of the services — emails, reports, timesheets and deliverables. Charges that cannot be linked to an actual benefit for the recipient are the ones most likely to be questioned.
GST and TDS in brief
Services between separate group companies are ordinary taxable supplies under GST, and supplies between related persons follow the valuation rules in the CGST Rules. Supplies between registrations of the same company in different states can also be taxable even without consideration. Because these rules have nuances — especially where the recipient cannot claim full input tax credit — review each arrangement with your tax adviser.
On the income-tax side, the payer company generally needs to deduct tax at source on fees for services under the applicable provisions. Remember that the Income-tax Act, 2025 applies from 1 April 2026, so update section references in agreements and processes. Larger groups should also check whether any domestic transfer pricing requirements apply to them.
A simple annual routine
- Review every intra-group agreement before the financial year starts
- Refresh the allocation keys using actual data
- Invoice monthly or quarterly rather than one large entry at year end
- Reconcile intra-group balances every quarter so both sides match
- Keep a short benefit file for each service with evidence of delivery
These steps also make consolidation much easier, as covered in our guide to consolidated financial statements for group companies.
Support for your group
Structuring intra-group services well needs finance, tax and legal input together. ATTPL Consultancy supports finance and tax processes for growing companies, and ATTPL Legal can draft and review service agreements. To discuss how a shared-services model can work in your group, contact ATTPL HOLDCO.
Frequently asked questions
Is it compulsory to charge group companies for shared services?
There is no single rule that every service must be charged, but uncharged or unexplained arrangements can create tax and governance questions. A documented, consistent approach is safer.
Is GST payable on management fees between group companies?
Generally yes, because services between separate companies are taxable supplies. Valuation and input tax credit depend on the facts, so confirm with a GST professional.
What evidence should we keep for intra-group charges?
Keep the agreement, allocation workings, invoices and proof that services were delivered, such as reports, emails and timesheets.
Sources and further reading
This article is general information, not tax or legal advice. Tax treatment depends on facts; consult a qualified professional.
