Facts of the Case

The petitioner, M/s. Alstom Transport India Limited, engaged in railway and metro infrastructure projects, had employees of its overseas group companies seconded to India, placed on its Indian payroll with salaries paid after TDS deduction, while the overseas entities continued to provide home-country social security benefits, reimbursed via debit notes. Since November 2020 the petitioner had discharged IGST on reverse charge basis on these reimbursements and availed input tax credit. Nonetheless, six orders dated 16.10.2024 confirmed a fresh IGST demand of Rs. 57,94,94,146 for July 2017 to March 2023, alleging import of 'manpower supply service' from overseas affiliates, prompting this writ petition before the Karnataka High Court challenging the demand and seeking a declaration that the taxable value of such intra-group secondment services is Nil.

Issues Involved

  1. Whether salary reimbursements paid to overseas group entities for seconded expatriate employees constitute a taxable supply of 'manpower supply service' attracting IGST under reverse charge.
  2. Whether CBIC Circular No. 210/4/2024-GST, deeming the taxable value of related-party services Nil where no invoice is raised and full ITC is available, applies to secondment arrangements.
  3. Whether the Supreme Court's ruling in Northern Operating Systems, decided under the Service Tax regime, mandates a taxable-supply finding under GST as well.
  4. Whether the impugned demand orders, passed despite the petitioner's reliance on the CBIC Circular, were sustainable.

Petitioner's Arguments

  • The seconded expatriates functioned under the petitioner's exclusive administrative and functional control, were integrated into its organisational structure, paid salaries subject to Indian TDS, and extended statutory employment benefits, establishing a genuine employer-employee relationship falling within the Schedule III exclusion from 'supply'.
  • No invoice was raised by the petitioner for any service allegedly received from the overseas affiliate; per paragraph 3.7 of CBIC Circular No. 210/4/2024-GST, where full ITC is available to the recipient and no invoice is issued, the value of such services must be deemed Nil.
  • The Delhi High Court in Metal One Corporation India Pvt. Ltd. v. Union of India had already endorsed this Nil-valuation clarification, holding that no further tax implications arise once value is treated as Nil under paragraph 3.7.
  • Even assuming, without conceding, that the secondment amounted to a supply, the deeming fiction under the Circular neutralised any further tax liability.

Respondent's Arguments

  • The Department contended that secondment of employees by the foreign parent to the petitioner constituted 'manpower supply service' under the Reverse Charge Mechanism per Section 5(3) of the IGST Act, read with Notification No. 10/2017-Integrated Tax (Rate).
  • Reliance was placed on the Supreme Court's substance-over-form ruling in CC, CE & ST v. Northern Operating Systems Pvt. Ltd., which held that despite the appearance of an employer-employee relationship, secondment arrangements can, in substance, constitute a taxable supply of manpower services warranting tax under reverse charge.

Court Order / Findings

  • The Court traced the evolution of the law from the pre-GST exclusion of employer-employee services, through the Supreme Court's fact-specific Northern Operating Systems ruling (which itself cautioned against being treated as a blanket precedent), to the GST Council's 53rd meeting recommendations and CBIC's clarificatory Circular dated 26.06.2024.
  • Where no invoice is raised by the Indian recipient in respect of services from a foreign affiliate and the recipient is eligible for full input tax credit, paragraph 3.7 of CBIC Circular No. 210/4/2024-GST deems the value of such services to be Nil under the second proviso to Rule 28(1) of the CGST Rules, and this deeming fiction, being binding on the authorities, leaves no scope for the Revenue to allege a taxable value or raise a reverse-charge IGST demand.
  • Since it was undisputed that no invoices were raised by the petitioner for the alleged secondment services, the value had to be deemed Nil, and the secondment arrangement was held not to amount to a taxable supply of manpower services amenable to IGST under reverse charge.
  • All six impugned orders confirming the Rs. 57.94 crore IGST demand, along with interest, penalty and consequential proceedings, were quashed and set aside.

Important Clarification

  • CBIC Circular No. 210/4/2024-GST's Nil-valuation rule under paragraph 3.7 applies squarely to cross-border employee secondment arrangements between related parties, effectively neutralising reverse-charge IGST exposure wherever no invoice is raised and full ITC is available to the Indian recipient.
  • The Supreme Court's Northern Operating Systems ruling, being expressly fact-specific to its Service Tax-era facts (foreign payroll, mark-up on reimbursement, task-specific secondment), does not automatically dictate a taxable-supply finding under the GST regime once the CBIC's later clarificatory circular is factored in.
  • Businesses with secondment arrangements should assess control, economic burden, and invoicing practices carefully, since the presence or absence of an invoice is now often outcome-determinative for reverse-charge IGST liability.

Sections Involved

  • Section 5(3), Integrated Goods and Services Tax Act, 2017 – reverse charge mechanism casting tax liability on the recipient for notified categories of supply.
  • Rule 28, CGST Rules, 2017 – valuation of supply between related persons, including the second proviso deeming Nil value absent an invoice with full ITC available.
  • Schedule III, CGST Act, 2017 – excludes services by an employee to employer in the course of employment from the scope of 'supply'.
  • CBIC Circular No. 210/4/2024-GST dated 26.06.2024 – clarifies valuation of related-party cross-border services, including secondment arrangements.

Decision – In Favour of

The decision is in favour of the assessee. The Rs. 57.94 crore IGST demand on secondment of expatriate employees was quashed in its entirety, applying the CBIC Circular's Nil-valuation rule.

Case Details

High Court of Karnataka at Bangalore; Writ Petition No.1779 of 2025 (T-RES); M/S. Alstom Transport India Limited vs Commissioner of Commercial Taxes and Others; Coram: Justice Sachin Shankar Magadum; Decided on 15.07.2025.

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