instruction No. 05/2023
This instruction examines the implications of the Hon’ble Supreme Court’s judgment in Northern Operating Systems Pvt. Ltd. on taxability of secondment of employees under GST. It clarifies that the Supreme Court’s decision was based on the specific factual matrix of that case and should not be applied mechanically to all secondment arrangements. Each case of employee secondment must be examined independently, considering contractual terms and actual conduct, to determine GST liability. The instruction cautions field formations against routine invocation of extended limitation under Section 74(1) and reiterates that it can be applied only where fraud, wilful misstatement, or suppression of facts with intent to evade tax is clearly established. Mere non-payment of tax does not justify invocation of Section 74(1). Officers are directed to keep these principles in mind while conducting investigations and issuing show cause notices.
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