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Reading: As MNCs  protest against  GST  posting notification,  CBIC tells  officials: don’t implement  SC  decision  mechanically 
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As MNCs  protest against  GST  posting notification,  CBIC tells  officials: don’t implement  SC  decision  mechanically 

Team Happen Recently
Last updated: 2023/12/15 at 11:15 AM
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 Secondment refers to the  delegation  of employees or  expatriates  to another part of the  organization at home  or  abroad.  

 After multinational companies in India received  several  GST notices  related to ‘sending’ employees abroad,  the Central Board of Indirect Taxes (CBIC) has  asked  its field  officials I do  not  “mechanically”  apply  the Supreme Court’s  2022  decision  in all cases.  

 Secondment refers to the  delegation  of employees or  expatriates  to another part of the  organization at home  or  abroad. This leads to  the  question  of  taxation of these  employees  –  whether they  will  be  considered  part of the Indian subsidiary or  a foreign  group company.  

In May last year, in the case of Northern Operating Systems Pvt. Ltd, the Supreme Court  has  held that  the posting/transfer  of employees from  a foreign  company to an Indian entity  falls within  the nature of  ‘recruitment  and  provision of manpower services’  and  will therefore  be  subject  to  tax on services.  

The authorities  have also  extended this  measure to GST, sending  notices to several multinational companies, including  auto  and FMCG  companies, to collect information on expatriates  and  employees  on secondment. work  with them. 

  The CBIC’s decision,  asking  the officials  to carefully  probe  each case,  came  after the industry made several representations to the CBIC  regarding the  blanket invocation of the SC  decision  by field  organizations against  all such  employment agreements  between  foreign  entities and companies in India. 

  “It may be  worth noting  that there may be  some type  of  arrangement regarding the placement  of employees of  a foreign  group company in  the employment of  the Indian entity. In each  agreement,  the tax implications may  vary,  depending  on  the specific nature of the contract and other terms and conditions attached to  the contract.  

Therefore, the decision of the  Supreme Court in  NOS  should not be applied mechanically in all  cases.  The investigation  in each case requires  careful consideration of its distinct factual matrix, including the terms of  the  contract between  a foreign  company and  an  Indian entity, to determine  its applicability.  or its extent under GST and  the  applicability of the principles  prescribed  by the  ruling of the competent authority.  Supreme  Court  in  the  NOS case,” the  guidelines  issued by the CBIC on Wednesday  said.  

 The CBIC noted that a “careful reading of the NOS  judgment” shows  that the Supreme  Court emphasized  “nuanced  considerations  based on the unique characteristics of each  particular agreement,  rather than  a single test ”. The industry  also  argued  that in many cases  relating to postings, field units mechanically invoke  the  extended period of limitation under  Section  74(1) of the Central GST  Act (CGST). 

 Section 74(1) of the  GST  Act  deals with  determination of non-payment or underpayment of tax or  misuse  of input tax credit under GST by fraud or  by  any  willful misrepresentation  or  hide the truth.  The CBIC said Section 74(1) cannot be invoked  solely for  non-payment of  GST  without  a  specific element of fraud or  intentional misrepresentation  or  concealment  of facts to evade  tax.  such cases and  issue a just  cause  notice.  “Only in  cases where the investigation  shows  that there is  substantial  evidence of fraud or  intentional 

misrepresentation  or  concealment  of  the truth  to evade  taxes  on the part of the  taxpayer can the  provisions of  Article 74(s) be relied upon. 1)  of  the  CGST Act  for  processing the issue.  of  the  show cause  notice  and  this  evidence should also be  a part of the show cause notice,”  he  said. 

 Manish Gaur,  senior associate at Lawyers  Lakshmikumaran &  Sridharan,  said  the  directions  issued by the CBIC have brought  a lot of  relief to  taxpayers as it clarifies that the  judgment  cannot be applied  mechanically  and  the  facts of each case must be carefully  analyzed  before  recommending  a  judgment. the request. “This direction  will also require the  Ministry  to be open to the  possibility of  cases of  recruitment  of  foreigners  in India  that are  not  import of  labor services and therefore will  not  have  a tax  impact,”  he said.  tax”.

 These instructions will also help  bring an end to the  various show cause notices issued  in  this  regard. “These  proactive, timely and  much-needed guidelines  have played a  vital  role in  the  successful implementation of GST.  When  the  above-mentioned guidelines are implemented judiciously, they can help in concluding various schemes,”  said  Abhishek Jain,  Head and Partner,  Indirect  Tax, KPMG.  

 For more  information,  visit at https://happenrecently.com/zepto/?amp=1

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