In a ruling that’ll impact multinationals deputing employees to their Indian affiliates, the Supreme Court has upheld the revenue department’s stand of imposing service tax on such arrangements. The principle laid down by the apex court will apply to the goods and services tax regime too. But more importantly it may have some unintended consequences under income tax law as well. The apex court has viewed this agreement in Northern Operating Systems’ case, with group companies in the U.S., the U.K., Ireland, Singapore, etc., as a contract of service involving supply of manpower by the foreign entity.
Against this backdrop, Ritesh Kanodia, Partner at Economic Laws Practice (ELP) has been quoted by BQ Prime in their article titled ‘One Supreme Court Ruling. Two Taxing Consequences’. He says, “The key aspect now would be for companies to decide whether the GST should be paid, and credit availed. We could see demand notices under the GST where tax has not been paid on similar arrangements. My sense is that there are many multinational companies that’ve not paid the GST because of potential adverse implications under income tax.”
Read the comment and detailed article here: https://bit.ly/3MPuzVk