AI Drafter 
TaxTMI 
TaxTMI 
2025 (7) TMI 1611
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....s by the petitioner does not attract IGST on the ground that it does not amount to manpower and recruitment supply of services from the overseas group entities to the petitioner/company. 2. The facts leading to the case are as under: The petitioner is engaged in the business of designing, manufacturing, supplying, installing, and commissioning goods pertaining to railway and metro infrastructure projects. In addition, the petitioner provides design and engineering services, including software upgradation and modification in metro projects. During the disputed period from July 2017 to March 2023, the petitioner avers that employees of its overseas group companies were seconded to work in India for a fixed tenure. The petitioner asserts that it executed employment agreements with each of these expatriate employees, detailing their appointments, salaries, and allowances. It is further submitted that during the term of their secondment, these expatriates were placed on the payroll of the petitioner in India, and their salaries were paid directly by the petitioner after deducting applicable Tax Deducted at Source (TDS) in accordance with the provisions of the Income Tax Act, 1961.....
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....w cause notice dated 26.09.2023. This Court, while disposing of the writ petition, relegated the petitioner to submit a detailed reply before the authorities, taking note of the thenrecently issued CBIC Circular dated 26.06.2024, which clarified that in the absence of an invoice, the taxable value is deemed to be 'Nil'. Despite submission of additional documents and explanations in line with this clarification, the respondent No.4 proceeded to pass the impugned order confirming the IGST demand on alleged import of manpower recruitment and supply services. 3. Learned counsel appearing for the petitioner, reiterating the grounds urged, placed reliance on the decision of the Delhi High Court in Metal One Corporation India Pvt. Ltd. vs. Union of India & Ors. 2024 DHC 8298 DB, wherein similar show cause notices were quashed in cases where no invoices were raised for alleged manpower supply. Relying on the said decision and the CBIC Circular dated 26.06.2024, learned counsel argued that salaries paid to expatriates cannot be treated as open market value under Rule 28 of the CGST Rules, 2017. He submitted that these payments, being in the nature of salaries, do not constitute considera....
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....P for the State. Perused the records. 8. The petitioner company asserts that, under a typical secondment arrangement, expatriate employees are deputed by a foreign parent or affiliate company to work for its Indian subsidiary for a specified period. Such arrangements are governed by a dual-contractual framework comprising (i) a Secondment Agreement executed between the foreign and Indian entities, and (ii) an Employment Agreement entered into directly between the seconded employee (secondee) and the Indian entity. The Secondment Agreement sets out the overarching terms of deputation, including the duration of the secondment, the general roles and responsibilities of the secondees, and the mechanism for reimbursement of costs, such as salaries and benefits paid by the foreign entity on behalf of the Indian company. In parallel, the Employment Agreement entered into with the Indian entity governs the specific terms of the secondee's full-time engagement in India during the secondment period. This agreement contains stipulations regarding the tenure of employment, location of work, compensation structure, employment duties, benefits, termination and resignation clauses, and dispute....
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.... appearance of an employer-employee relationship, secondment arrangements in substance constituted a taxable supply of manpower services. The Court's key findings included that the foreign entity remained the economic employer, retaining control over the secondees' terms of employment, who continued on the foreign payroll with salaries fixed in foreign currency and additional allowances such as hardship pay. The secondees were assigned to the Indian entity only for specific tasks and durations, after which they reverted to the foreign company. Importantly, the foreign entity levied a mark-up on salary reimbursements to the Indian company to cover administrative costs, reinforcing the conclusion that the arrangement was in the nature of a service transaction liable to tax. 12. Based on the specific facts before it, the Hon'ble Supreme Court in Northern Operating Systems Pvt. Ltd. (supra) held that the secondment arrangement amounted to a supply of manpower services by the foreign entity to its Indian subsidiary and was therefore liable to Service Tax under the Reverse Charge Mechanism (RCM). Crucially, the Hon'ble Apex Court clarified that its ruling was fact-specific and should ....
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....20, provided the principal tax is paid by 31 March 2025, this relief is to be implemented through the insertion of Section 128A in the CGST Act. Second, with respect to valuation under Rule 28, the Council clarified that in related party transactions where the Indian recipient is eligible for full Input Tax Credit (ITC), the declared value may be accepted as the open market value, and where no invoice is raised, the value may be deemed 'NIL' a clarification particularly relevant to secondment arrangements. Third, it was clarified that ITC may be claimed in the financial year in which the invoice is raised, rather than when tax is paid, thus addressing concerns over denial of ITC due to timing mismatches. These recommendations were formally implemented by way of a CBIC circular dated 26.06.2024. 16. In the present case, the petitioner contends that the expatriate employees were seconded by the foreign parent solely to render services to the petitioner in India. Throughout the period of secondment, these employees were under the exclusive administrative and functional control of the petitioner, were integrated into its organizational framework, and adhered to its internal policies....