Global Capability Centres (GCCs) and multinational companies are expected to approach the Finance Ministry through industry body NASSCOM, seeking clarity on the tax treatment of cross-border employee secondments following a recent Delhi High Court ruling.
According to media reports, NASSCOM is likely to submit a representation to the Finance Ministry within the next two weeks, requesting clarification to prevent disruption to existing secondment arrangements.
The move follows the Delhi High Court’s 18 June judgment in a case involving EY US, which held that payments made by EY India to EY US for employees deputed to India should be treated as fees for technical services rather than tax-free reimbursements.
Traditionally, under secondment arrangements, employees remain on the payroll of the overseas parent company while working temporarily with the Indian entity. The Indian company reimburses the parent for salary costs, and such reimbursements have generally not attracted tax or tax deduction at source.
According to the report, the ruling has prompted several technology firms and GCCs to temporarily pause employee secondments planned for FY27 while they assess the legal and tax implications. Some companies are also evaluating alternative employment models, including transferring employment contracts directly to their Indian entities.
If the judgment is upheld, overseas group companies could face additional tax liabilities in India, while Indian entities may be required to deduct tax at source on reimbursement payments.
The ruling has also raised concerns over the possibility of creating a Permanent Establishment (PE) for foreign companies in India, potentially exposing a portion of their global profits to Indian taxation and increasing compliance requirements.
India has emerged as one of the world’s largest GCC hubs, with multinational companies relying extensively on cross-border secondments to deploy specialised talent and leadership. Industry observers believe prolonged uncertainty over the tax treatment of these arrangements could increase operating costs and prompt companies to reconsider their global workforce deployment strategies.
