In Northern Operating Systems case [Civil Appeal No. 2289-2293 of 2021], the Hon'ble Supreme Court held that the secondment of employees by an overseas entity to its Indian subsidiary was liable to Service Tax under the Reverse Charge Mechanism (RCM). This decision triggered demands under GST on Indian companies that had expat employees from overseas group entities on their rolls. The notices issued totally ignored the key aspect that when the services are provided by employee to employer in relation to employment, then there may not be any GST liability in spite of the above judgement. Services by employee to employer are covered in Schedule III Entry 1 [neither supply of goods nor of services].
Thereafter, in its instruction dated 13.12.2023, the CBIC directed tax authorities to assess secondment cases individually and to refrain from invoking Section 74 of the CGST Act unless there was clear evidence of fraud or willful suppression.

Circular No. 210/4/2024-GST, dated 26.06.2024, was issued, which clarifies the legal position regarding cross-border intra-group services where full input tax credit is available to the recipient. This is vide Rule 28 second proviso [applicable to arrive at value of related party transactions under GST], which sets out that when full ITC is available to the recipient, then the invoice value can be deemed as market value.
The Circular clearly states that if the related domestic entity does not raise an invoice [self-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.
The latest Karnataka HC decision in Alstom Transport India Limited vs. Commissioner of Commercial Taxes (Writ Petition no. 1779 of 2025 (T-RES)) allows the writ petition and holds that the secondment of employees does not amount to a taxable supply of manpower services under the GST regime. The paper writer has analyzed the decision and its implications hereunder.
Karnataka HC decision: Alstom Transport India Limited vs. Commissioner of Commercial Taxes and GST implication:
Facts and Issues
- From July 2017 to March 2023, the employees of overseas group companies were seconded to work in India for a fixed tenure with the petitioner.
- The petitioner has executed employment agreements with expatriate employees, detailing their appointments, salaries, and allowances.
- During the secondment, the secondees remain subject to the operational supervision, control, and administrative authority of the Indian company.
- They are required to comply with all internal rules and policies of the Indian entity, including office hours, code of conduct, and statutory obligations under Indian tax laws, particularly the deduction of tax at source (TDS) from their salaries.
- The Indian company disburses the salary directly to the secondees; certain components such as social security contributions or benefits mandated under the laws of the home country may be paid by the foreign entity, which are later reimbursed by the Indian subsidiary.
- Functionally and contractually, the secondees are fully integrated into the Indian company's workforce and operate exclusively under its control during the term of their deputation.
Despite furnishing requisite documents and asserting that the seconded expatriates were on the petitioner's payroll, SCN was issued proposing to demand IGST along with interest and penalty for the period July 2017 to March 2023. The allegation is that the petitioner was liable to pay IGST on the import of 'Manpower Supply Service' from its overseas affiliates.
In response, the petitioner has relied on Circular No. 210/4/2024-GST dated 26.06.2024, which clarifies that in cases involving related party transactions where full input tax credit is available to the recipient, the value declared in the invoice may be deemed as the open market value under the second proviso to Rule 28 of the CGST Rules, 2017. The petitioner asserts that since no invoices were raised, the open market value must be deemed to be 'Nil.'
Decision of the High Court
- Throughout the period of secondment, these employees were under the exclusive administrative and functional control of the petitioner, were integrated into its organizational framework, and adhered to its internal policies, code of conduct, and disciplinary rules. Their salaries were subjected to Indian income tax, including deduction of TDS, and they were extended statutory employment benefits under Indian labor laws.
- Collectively, these facts establish the existence of a genuine employer-employee relationship between the petitioner and the seconded personnel, covered within the exclusion under Schedule III of the CGST Act and thereby not constituting a taxable supply.
The court has extracted para 3.7 of circular 210/2024, which reads as under:
"3.7 In view of the above, it is clarified that in cases where the foreign affiliate is providing certain services to the related domestic entity, and where full input tax credit is available to the said related domestic entity, the value of such supply of services
declared in the invoice by the said related domestic entity may be deemed as open market value in terms of the second proviso to Rule 28(1) of the CGST Rules.
Further, in cases where full input tax credit is available to the recipient, if the invoice is not issued by the related domestic entity with respect to any service provided by the foreign affiliate to it, the value of such services may be deemed to be declared as nil and may be deemed as open market value in terms of the second proviso to Rule 28(1) of the CGST Rules."
- Even if such secondment arrangement is assumed to be a supply, the deeming fiction under the Circular 210 neutralizes any scope for further tax liability. This Court has emphasized paragraph 3.7 of circular 210 supra.
- This Court is in agreement with the view of the Delhi High Court in Metal One Corporation India Pvt. Ltd. v. Union of India & Ors. (W.P.(C) 14945/2023), which has also endorsed this clarification.
- Following the clarification in Para 3.7, the value of such services must be deemed to be 'Nil' and treated as the open market value.
- The Circular, being binding on the authorities, leaves little room for the Revenue to allege a taxable value in the absence of an invoice.
- Further, 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 input tax credit is available.
Key Takeaways
a. Expat Employees are on secondment; no supply is covered in Third Schedule Entry 1, no supply of goods/services, and no liability to GST.
b. When the recipient entity can avail ITC, as per the proviso to Rule 28, the value can be "nil."
c. Similarly clarified in circular 210/4/2024-GST.
Conclusion
The latest judgement has given welcome clarity on the issue of frivolous demands/proceedings on expat employee costs under RCM, especially where the recipient is eligible to avail credit [recipient engaged in making taxable outward supplies/exports].
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