GST on Secondment/Deputation of Expats in India

India has an extensive network of expats working with various companies in different sectors. When these expats come to India, they are considered as non-residents and are liable to pay taxes on their earnings. The government of India has introduced various tax and regulatory policies to manage the tax implications of the expat community in India.

The Goods and Services Tax (GST) is one such policy that regulates the tax implications on secondment/deputation of expats. Secondment refers to the temporary transfer of an employee from one organization to another or from one department to another within the same organization. Deputation, on the other hand, refers to the temporary transfer of an employee from one country to another for a specific period.

When an expat is deputed or seconded to an Indian company, the Indian company may reimburse the expat's employer for the salary and other expenses incurred during the deputation/secondment period. The reimbursement may include various expenses like accommodation, travel, and other allowances. In such cases, the GST implications arise on the reimbursement paid by the Indian company to the expat's employer.

The GST on secondment/deputation of expats is governed by the Place of Supply (PoS) rules under the GST Act of India. The PoS rules determine the place where the supply of goods or services has taken place. In the case of the secondment/deputation of expats, the place of supply is the location of the Indian company where the expat is deputed/seconded.

The Indian company is required to pay GST on the reimbursement paid to the expat's employer. The GST rate applicable on the reimbursement will depend on the nature of expenses reimbursed. For instance, the GST rate on accommodation services is 18% while the GST rate on transportation services is 5%. Therefore, the Indian company must ensure that the correct GST rate is applied on the reimbursement paid to the expat's employer.

The Indian company may claim input tax credit (ITC) on the GST paid on the reimbursement of expenses incurred during the deputation/secondment period. The ITC can be claimed against the output GST liability of the Indian company. Therefore, it is essential for the Indian company to maintain proper records of the expenses reimbursed and the GST paid on such reimbursement.

It is crucial for the Indian company to understand the GST implications on the reimbursement paid to the expat's employer. Non-compliance with the GST regulations may lead to penalties and fines. Therefore, it is advisable for the Indian company to seek the advice of a tax consultant who can guide them on the GST implications on the secondment/deputation of expats.