Nearly Rs 1600 cr as GST has been paid by the Indian subsidiaries of as many as 80-90 multinational corporations (MNCs) together on the claimed services from the offshore pertinent companies. In the former months, the taxes filed via MNCs are towards the transactions incurred between FY18 and 22.
Before distinct MNCs in the past few months, the (Directorate General of GST Intelligence) has served GST liability notices after the ruling of the Supreme Court in the case of Northern Operating Systems (NOS) which was furnished in the previous year, as per the official. Till now the companies already filed the payment of nearly Rs 1600 cr of the tax obligation, however, no penalty has been filed through them. Rs 1300-1400 cr is the approximate cumulative penalty amount.
The Supreme Court in May 2022 held that the secondment of the employees to the group of Indian companies consequenced in the provision of the taxable service, as well as the salary cost amount of the seconded employees reimbursed to the group companies shall be liable to pay the tax.
After the NOS case judgment, tax authorities have issued notices to several companies involving inbound secondments. Although the ruling relates to the Service tax regime, the Supreme Court’s insights hold relevance in determining GST applicability regarding overseas group company secondments during the GST era. The Court’s comments, based on specific agreements, focused on prioritizing substance over form.
Under the GST regime, authorities assert that salaries or allowances paid by foreign companies to expatriates, later reimbursed by their Indian arms, are subject to taxation.
Many companies have opted to pay taxes without interest for now, intending to contest any demands regarding interest and penalties.
The tax official previously mentioned noted that among the MNCs settling taxes are Maruti Suzuki, Hyundai, and Aramco India. These companies hadn’t responded to emails regarding this matter as of Wednesday’s press time.
Back in September, Maruti Suzuki disclosed to exchanges that GST authorities had issued a show cause notice amounting to Rs 139 crore for the period between July 2017 to August 2022. The notice proposed interest, penalties, and adjustment of already paid taxes under reverse charge for specific services. Maruti Suzuki stated its intent to respond to the notice before the Adjudicating Authority.
Tax experts highlighted the immediate consequences of the Supreme Court ruling. It resulted in GST liabilities under the RCM for Indian companies utilizing services from foreign expatriates of overseas group firms.
While GST could be offset against output service tax liabilities, for exporters, it poses a challenge by tying up working capital since they usually rely on GST refunds to cover costs, unlike domestic suppliers who usually enjoy immediate set-offs.
