Analysis
Customs
1 min read
Employee Secondment Subject to Service Tax: CESTAT Affirms Airbus Demand
Full Story
CESTAT Bangalore held that employee secondment is subject to service tax as 'Manpower Recruitment or Supply Agency Service', but removed extended period of limitation and penalties.
Background
The ruling involves Airbus Group India, where employees were deputed from Airbus SAS France, with the department raising service tax demands. The core issue revolves around whether secondment constitutes a taxable manpower supply service.
Key Analysis
SC precedent
The ruling aligns with the Supreme Court's view on the taxability of employee secondment.
No suppression
Extended limitations & penalties were removed due to no willful suppression or misstatement.
Normal period demand
Service tax demand was confirmed only for the normal period, along with interest.
Bottom Line
Businesses with employee secondment arrangements should review contracts, considering potential service tax implications, but also can take heart that penalties may not apply.
Watch For
Monitor potential GST implications on secondment arrangements, as service tax is now replaced by GST.
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