GST on employee secondment from a foreign group

Following the Supreme Court's decision in Northern Operating Systems, the secondment of employees from a foreign group company to an Indian entity can be treated as a taxable supply of manpower service, attracting IGST under reverse charge. Circular 210/2024-GST clarified valuation, easing exposure where full ITC is available.

The Northern Operating Systems ruling

In C.C., C.E. & S.T. v. Northern Operating Systems (NOS), the Supreme Court held that where a foreign group company seconds employees to an Indian entity and retains the employer character (paying salary abroad, with the secondees returning), the arrangement is in substance a supply of manpower service by the foreign company. Such a service, being an import, is taxable under reverse charge in the Indian entity's hands.

The valuation relief: Circular 210/2024

Circular 210/2024-GST clarified that, for related-party imports of service where full input tax credit is available to the recipient, the value declared in the invoice is deemed to be the open-market value — and where no invoice is issued, the value may be treated as nil. This substantially reduces the exposure for routine intra-group secondments where the Indian entity can claim full ITC of the RCM paid. Verify the precise wording for your facts.

Assessing your own arrangements

• Map who bears the real employer functions: control, appraisal, termination, payroll economics.
• Check whether the secondee is on the Indian entity's payroll (more likely employment) or the foreign entity's (more likely service).
• Quantify the RCM exposure and the ITC position; where full ITC is available, the net cost may be limited.
• Consider the interaction with permanent establishment and transfer pricing on the same arrangement.

Documentation to maintain

Keep the secondment agreement, evidence of the employer-employee relationship with the Indian entity (where claimed), payroll and reimbursement records, and the GST RCM/ITC working. For past periods, evaluate exposure in light of NOS and the 210/2024 relief before taking a position.