Under the Goods and Services Tax (GST) regime in India, the secondment or deputation of expatriates (also known as "deemed supplies") is subject to GST if the expatriate employee is being reimbursed by the Indian company for the services provided to the company.
If the expatriate is working for an Indian company and is being paid by the company, then the Indian company will be considered as the recipient of the service, and the services provided by the expatriate will be considered as a "supply" under the GST law. The Indian company will have to pay GST on the value of the deemed supply at the applicable rate.
However, if the expatriate is not being reimbursed by the Indian company for the services provided to the company, then the secondment or deputation of the expatriate will not be subject to GST.
It is important to note that the specific details of GST applicability on the secondment or deputation of expatriates can vary depending on various factors such as the nature of the services provided, the contractual arrangements between the parties involved, and the specific GST regulations in force. Therefore, it is recommended that you consult a tax expert or refer to the relevant GST regulations and guidelines before seconding or deputing an expatriate to India or from India.
The issue of GST on secondment or deputation of expatriates was considered by the Supreme Court of India in the case of Intercontinental Consultants and Technocrats Pvt. Ltd. vs. Union of India and Ors. The case was heard by a bench of Justices Rohinton Fali Nariman and Navin Sinha.
In this case, the issue before the court was whether the secondment of employees by a foreign company to an Indian company constituted a "supply" under the GST law, and whether GST was applicable on such supplies.
The Supreme Court, in its judgment delivered in the year 2021, held that secondment or deputation of employees by a foreign company to an Indian company would not be considered as a "supply" under the GST law if the foreign company does not charge any consideration for the services provided by its employees to the Indian company.
The court observed that the essence of secondment is the transfer of an employee from one company to another for a limited period, and that the seconding company continues to pay the employee's salary during the period of secondment. Therefore, the court held that there was no "supply" of services by the foreign company to the Indian company, and no GST would be applicable in such cases.
However, the court clarified that if the foreign company charges a fee or consideration for the services provided by its employees to the Indian company, then such services would be considered as a "supply" under the GST law, and GST would be applicable on the value of the services provided.
Overall, the Supreme Court judgment clarifies the GST implications on secondment or deputation of expatriates, and provides much-needed guidance to businesses operating in India. It is recommended that businesses seek professional advice and review their arrangements with respect to the secondment or deputation of employees to ensure compliance with the GST regulations.
The implications of GST on secondment or deputation of expatriates depend on whether the expatriate is being reimbursed by the Indian company for the services provided to the company or not.
If the expatriate is being reimbursed by the Indian company for the services provided to the company, then the secondment or deputation of the expatriate will be subject to GST in India. The Indian company will be considered as the recipient of the service, and the services provided by the expatriate will be considered as a "supply" under the GST law. The Indian company will have to pay GST on the value of the deemed supply at the applicable rate.
However, if the expatriate is not being reimbursed by the Indian company for the services provided to the company, then the secondment or deputation of the expatriate will not be subject to GST.
In case of a foreign company providing secondment or deputation services to an Indian company, the implication of GST will depend on the nature of the services provided and whether the foreign company charges any fee or consideration for the services provided by its employees to the Indian company. If the foreign company charges a fee or consideration for the services provided, then such services would be considered as a "supply" under the GST law, and GST would be applicable on the value of the services provided.
It is important to note that the GST implications on secondment or deputation of expatriates can be complex and may vary depending on various factors such as the nature of the services provided, the contractual arrangements between the parties involved, and the specific GST regulations in force. Therefore, it is recommended that businesses seek professional advice and review their arrangements with respect to the secondment or deputation of employees to ensure compliance with the GST regulations.
Taxpayers involved in secondment or deputation of expatriates should consider the following action points to ensure compliance with GST regulations in India:
Determine whether the secondment or deputation of the expatriate is a "supply" under the GST law, based on whether the Indian company is reimbursing the expatriate for the services provided to the company.
If the secondment or deputation is a "supply" under the GST law, determine the value of the deemed supply and the applicable rate of GST.
If the secondment or deputation is a "supply" under the GST law, ensure that the Indian company has obtained a GST registration, and issue a GST invoice to the Indian company for the value of the deemed supply.
If the foreign company is charging a fee or consideration for the services provided by its employees to the Indian company, the services would be considered as a "supply" under the GST law, and GST would be applicable on the value of the services provided. In such cases, ensure that the foreign company is registered for GST in India and that the applicable GST is charged and paid.
Ensure that all relevant documentation such as contracts, invoices, and payment receipts are maintained in compliance with GST regulations.
Review and update the company's compliance processes to ensure that they are in line with GST regulations and that the company's GST returns are filed on a timely basis.
Seek professional advice from a tax expert to ensure that the company is fully compliant with GST regulations in India and to mitigate any potential risks or liabilities.
By taking these action points into consideration, taxpayers can ensure that they are in compliance with GST regulations related to secondment or deputation of expatriates and avoid potential legal and financial risks.
Furnishing of ineligible/blocked ITC & reversal: Form GSTR-3B
Bihar Mukhyamantri Vridhajan Pension Yojana (MVPY)
Clarification on formula for grant of GST refund in cases of inverted duty structure
