The Karnataka High Court has on 15 July 2025 allowed the writ petition against the demand of IGST in the case involving secondment of expats by the assessee from the overseas group entities. The Department in the case Alstom Transport India Limited v. Commissioner had alleged that the activity amounted to receipt of manpower and recruitment services from abroad and was thus liable to IGST under reverse charge. The assessee was represented by Lakshmikumaran & Sridharan Attorneys here.
Not a taxable supply
The High Court observed that there was existence of a genuine employer-employee relationship between the assessee and the seconded personnel, falling squarely within the exclusion under Schedule III of the CGST Act, 2017 and thereby not constituting a taxable supply.
It, for this purpose, noted that throughout the period of secondment, the seconded employees were under the exclusive administrative and functional control of the Indian company/assessee, were integrated into its organizational framework, and adhered to its internal policies, code of conduct, and disciplinary rules. The Court also noted that the salaries were paid directly by the assessee and subjected to Indian income tax, and that the seconded employees were extended statutory employment benefits under Indian labour laws.
Nil value of service
Allowing the petition, the High Court also noted CBIC Circular No. 210/4/2024-GST, dated 26 June 2024 according to which if the related domestic entity does not raise an invoice in respect of services received from its foreign affiliate, the value of such services may be deemed to be ‘Nil’ and such ‘Nil’ value shall be treated as the open market value in terms of the second proviso to Rule 28(1) of the CGST Rules, 2017.
The Court observed that invoices were not raised by the assessee in respect of the services allegedly rendered by the foreign affiliate through seconded employees. The High Court was hence of the view that even if such secondment arrangement is assumed to be a supply, the deeming fiction under the said Circular neutralises any scope for further tax liability.
It may be noted that the Court also noted that the second proviso to Rule 28 cannot be invoked to displace the legal effect of a ‘Nil’ value where the legislative framework itself permits such a deeming fiction, especially when full ITC is available.