No GST on Salaries Paid to Foreign Employees

Centax Editorial Board

March 1, 2026

• 2 min. read

Case Details: Huawei Technologies India Pvt. Ltd. vs. State of Karnataka (2026) 39 Centax 336 (Kar.)

Judiciary and Counsel Details

S.R. Krishna Kumar, J.
Smt. Vani Dwevedi, Shri Ravi Raghavan & Smt. Meghna Lal, Advs., for the Petitioner.
Smt. Jyoti M. Maradi, HCGP, for the Respondent.

Facts of the Case

The petitioner employed foreign nationals directly to provide software development and IT-enabled services within its group companies. The department issued a show cause notice proposing IGST on salaries paid to these foreign nationals, alleging that it had imported ‘Manpower Recruitment and Supply Service’ from non-resident taxable persons. It was submitted that a direct employer-employee relationship existed and that the foreign nationals were employed exclusively for a fixed period, contending that such salaries fall outside the ambit of GST. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that, under Section 7 read with Section 2(77) of the CGST Act and Section 2(11) of the IGST Act, salaries paid to directly employed foreign nationals do not constitute a supply of services for GST purposes. The Court observed that the foreign nationals could not be considered non-resident taxable persons and that the conditions for import of service under the IGST Act were not satisfied. Consequently, the transaction falls within Entry 1 of Schedule III, which excludes services provided by an employee to the employer in the course of employment from GST. The Court held that in the absence of an invoice, the value of supply is deemed nil, and no tax was payable.