Madras High Court Temporarily Halts Rs 80 Crore GST Demand on Hyundai’s Seconded Employees
In a significant development, the Madras High Court has intervened to temporarily halt a hefty Goods and Services Tax (GST) demand amounting to approximately Rs 80 crore on the salaries paid by Hyundai Motors to its seconded employees. The decision comes in response to the company’s challenge against a tax demand notice issued by GST authorities on December 23, 2023, which deemed the entire salary amount paid to seconded employees as taxable under GST regulations.
Secondment, a prevalent practice among multinational corporations, entails a temporary assignment where an employee transitions from one role to another, typically within the same corporate group, either domestically or internationally, for a predetermined period.
In its defence, Hyundai Motors contested the tax demand, arguing that the secondment arrangement does not warrant the imposition of GST on the salaries of its seconded employees. Echoing similar sentiments, several high courts have already granted interim relief and are actively examining the classification of such arrangements under GST laws.
Justice Senthilkumar Ramamoorthy, presiding over a single-judge bench, remarked in an order issued last week, “Since a prima facie case is made out and several high courts granted interim relief and are also examining whether such an arrangement would qualify as a taxable supply, there shall be an interim stay of further proceedings pursuant to the impugned order until the matter is heard next.”
The Madras High Court has scheduled a hearing for April 8 to delve into the intricacies of the case and address the pertinent legal questions surrounding the GST treatment of secondment arrangements.
However, GST authorities contend that in the context of secondment, Hyundai Motors ought to be deemed as the recipient of the services provided by the expatriate employees. They argue that such services should be categorized as “supply of manpower” under prevailing GST laws, thereby justifying the tax demand.
This judicial intervention by the Madras High Court underscores the complexity surrounding the taxation of secondment arrangements and highlights the need for a nuanced understanding of such practices within the ambit of GST regulations. As the legal battle unfolds, stakeholders await further clarity on the treatment of secondment arrangements under the purview of GST, a matter of considerable significance for multinational corporations operating in India.
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