In yet another case related to Goods and Services Tax (GST) notices on salaries paid to expats by subsidiaries of multinational companies (MNCs), a High Court has provided interim relief to a firm and restrained the authorities from taking coercive measures.
The Punjab and Haryana High Court gave the relief to Kanematsu India, a subsidiary of Japanese company Kanematsu Corporation. GST authorities had issued a show-cause notice to Kanematsu India, demanding more than Rs 2.6 crore on reimbursement of expat employees’ salaries made by the company to the Japanese parent. The company had raised several jurisdictional- and limitation-related preliminary objections in response to intimation by GST authorities. These objections were not addressed in the show-cause notice, the court observed.
It asked the authorities to decide on the jurisdictional objection the company had raised – among others – during the adjudication of the notice and also restrained any coercive steps in case an adverse order is passed.
One of the expert said the relief to Kanematsu India allows taxpayers to justify or present their cases, offering some respite to those involved in transactions related to expatriate salary reimbursement to their associated or group companies overseas. “The relief is particularly significant in the context of the Supreme Court judgement in the Northern Operating System case, establishing GST under reverse charge for such payments to group companies,” he said. GST notices followed a Supreme Court judgment in May 2022 in the Northern Operating System (NOS) case.