Delhi HC Ruling on GST on Employee Secondment
Background of GST on Employee Secondment Notices
The Hon’ble High Court of Delhi quashed SCNs issued to taxpayers demanding GST on employee secondment by overseas entities.
Key Observations in the Delhi HC GST Ruling
In the recent judgment involving Metal One Corporation, Sony India, and others, the Bench observed that proceedings initiated in terms of the impugned SCNs, based on the Supreme Court’s ruling in Northern Operating Systems concerning secondment of employees, are futile and impractical, particularly in light of CBIC Circular 210/4/2024-GST.
This development is also relevant from a broader taxation advisory services perspective where businesses assess the indirect tax implications of cross-border employee deployment structures.
Impact of CBIC Circular 210/4/2024-GST
The aforesaid circular released by CBIC provides for the valuation of services between distinct or related entities wherein the recipient is eligible for full input tax credit (ITC).
In such cases, it is clarified in the circular that the value of services mentioned in the invoice raised by the domestic company will be treated as its open market value in terms of the second proviso of Rule 28(1) of the CGST Act (Valuation Rules). However, in case no invoice is raised by the taxpayer, the open market value will be treated as NIL. Considering the above, the bench ruled in favor of the taxpayer. Based on this circular, the Delhi HC ruled in favor of the taxpayer, providing relief in cases concerning the secondment of employees taxability.
Where businesses are evaluating multi-jurisdictional structuring and broader tax implications of such arrangements, aligned support under GST Advisory Services may also become relevant alongside GST analysis.
Additional Resources
To further understand the broader implications of GST on employee secondment, valuation between related parties, and litigation exposure, the following resources provide relevant context: