In significant relief to taxpayers, the Central Board of Indirect Taxes and Customs (CBIC) has said officers should be more mindful in raising demand in secondment cases and should not apply the Supreme Court ruling in the Northern Operating Systems case “mechanically”. It has also said that Section 74(1) of the GST Act for sending a notice should only be invoked in cases of genuine fraud or evasion of taxes.
“It may be relevant to note that there may be multiple types of arrangements in relation to secondment of employees of overseas group company in the Indian entity. In each arrangement, the tax implications may be different, depending upon the specific nature of the contract and other terms and conditions attached to it,” the CBIC said in a recent circular, adding that the decision of the Supreme Court in the NOS judgment should not be applied mechanically in all the cases.
“Investigation in each case requires a careful consideration of its distinct factual matrix, including the terms of contract between overseas company and Indian entity, to determine taxability or its extent under GST and applicability of the principles laid down by the Honourable Supreme Court’s judgment in NOS case,” the CBIC has further said.
Secondment refers to a temporary transfer by a company of some of its employees to another company and is a common practice in many multinational companies who often send employees to a subsidiary in another company. Following the Supreme Court ruling in the NOS case in May 2022, several MNCs had received GST notices for payment of taxes.
Read more at: Business Today
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