Assessees liable to pay service tax on secondment of employee from overseas group companies will not take benefit of the two-month window to be opened for transitional credit claim – Shri Vivek Johri – CBIC Chairman

In an interview to Business Line, on being asked “As the Supreme Court has ruled that assessees are liable to pay service tax on secondment of employee from overseas group companies, there is a thinking that companies will have to review their existing arrangement and secondment contracts under the GST regime. What do you have to say?” CBIC Chairman Vivek Johri said that There was a SC judgment in the Northern Operating system case, where an appeal was filed against CESTAT order. It pertained to the service tax era. The issue was that if you have an expat working for a subsidiary of an MNC abroad and the salary was paid to him, is that taxable under service tax or not? The Court held that it is taxable. But, as I said, this is a service tax judgment. The issue sustains even under GST.

Under GST, there is no problem like there was no problem under service tax. It is treated as supply of service on which tax is to be paid on Reverse Charge Basis. Under GST, you are entitled to take ITC of whatever tax you pay. The problem is with service tax for which the court has acknowledged the liability.

He further told that Now, it will not be possible for those taxpayers to get ITC of that service tax because the transitional period is over and they are required to pay tax because demands stand confirmed by the Supreme Court. So, the problem of ITC under GST does not continue. Under the GST law, there is no problem, but for past liability of service tax, if the taxpayers want to take credit now, that will not be admissible.

Answering the question “Can these assessees take benefit of the two-month window to be opened for transitional credit claim?” CBIC Chairman told that they won’t be able to apply because that window is meant for credit which was in the book of accounts as on June 30, 2017. But for some reason, they were prevented from either filing the claim on time or they could not file because of technical glitches. Even if the assessee has to pay the service tax, it will not be covered by the SC judgment on transitional credit.

Source: Business Line