Whether RCM is leviable on Secondment of employees paid to a
parent/group company located outside India?
Secondment of employees has to be examined from the perspective of whether the effective employment has shifted from the parent company located outside India to the Indian group company. Within a multinational group, it is relatively frequent common for employees of one company to be temporarily seconded to another company of the group and to perform business activities that clearly belong to the business of that other company.
In such cases, administrative reasons (e.g. the need to preserve seniority or pension rights) often prevent a change in employment contract. Usually there is no formal agreement between the two companies on such transfer, because of which a confusion might arise whether such secondment is a supply of manpower or transfer of employment.
In our view in all such cases the companies should enter into proper agreement for transfer of employment whereby the effective control of the employee is shifted from the parent company to the
group company. It is also necessary that the parent company during the tenure of secondment forgoes all its claims, responsibility, liability or any other connect with the seconded employee and for all real and economic purpose this seconded employee should be accountable to the group company to whom he is seconded.
In such cases payment of salary will also be made directly by the group company and thus no payment will flow from group company to parent and thus GST applicability can be kept at bay.
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