QUAGMIRE OF EMPLOYER – EMPLOYEE RELATIONSHIP

UNDERSTANDING THE DISPUTE
In a landmark decision, the Larger Bench of the Hon’ble Supreme Court has dealt with the issue of taxability of secondment transactions under service tax in the case of Commissioner vs. Northern Operating Systems Private Limited (NOS) [2022-VIL-31-SC-GST].

The brief facts of the case were that NOS is a company incorporated in India to provide various back-office support services to its group companies across the globe on a cost-plus basis, for which separate agreements are also entered into. In the course of providing the said services, NOS requests its group company to “second” skilled managerial and technical personnel to assist in NOS’s business activities under a secondment agreement entered into with its foreign group companies. This is a separate agreement between the two parties, important terms of which are summarised below (as referred to in the judgment):

a.    Upon request from NOS, the foreign group company shall select employees who possess the expertise required by NOS based on the description of skills and competencies required by NOS.

b.    Foreign group company shall second the employees to NOS for the time period.

c.    The employees seconded to NOS shall continue to be remunerated through the payroll of foreign group company only for the continuation of social security, retirement and