In the recent ruling in the case of M/S Alstom Transport India Ltd, the Karnataka HC quashed an IGST demand raised on Alstom India for alleged “manpower supply” via expat secondment from its foreign group companies. The Court held that expats were on Alstom India’s payroll, under its control and had employment contracts with it—thus forming an employer-employee relationship.
For project work in India, expatriate employees were seconded from overseas group entities and placed under the assessee’s control and payroll. The assessee:
Despite this, tax authorities issued a Show Cause Notice (SCN) alleging it amounted to an import of manpower supply service, attracting IGST liability under the Reverse Charge Mechanism (RCM).
The court laid out the economic employer test, the nature of posting and integration into the Indian workforce test to determine the employer-employee relationship. Referring to Circular No. 210/4/2024-GST as below:
Also, regarding seconded expatriates it has been found that:
The Court, supported by the CBIC Circular, clarified that secondment of expatriates to the Indian entity does not amount to taxable supply under GST when no consideration is charged and full ITC is available. The arrangement reflects an employer-employee relationship, not manpower supply, eliminating any GST demand.