Huawei Technologies Not Liable for IGST on Salaries Paid to Foreign Employees: Karnataka HC [Read Order]

In a recent ruling, the Karnataka High Court quashed a show-cause notice demanding over ₹85.51 crore in Integrated Goods and Services Tax (IGST), interest, and penalty from Huawei Technologies India Pvt. Ltd. for salaries paid to its foreign national employees for AYs 2018‑19 to 2022‑23.

The case arises from the fact that the Deputy Commissioner of Commercial Taxes had issued a notice on 23.12.2023, alleging that the payments constituted “import of manpower recruitment and supply services” under the GST law.

The petitioner, Huwai Technologies India Pvt Ltd, argued that the foreign nationals were directly employed under valid contracts, with salaries deposited in Indian bank accounts, income tax deducted under the Income Tax Act 1961, and social security benefits provided at par with those of Indian employees. The company contended that such payments represented an employer–employee relationship, which is excluded from GST under Entry 1 of Schedule III of the Central Goods and Services Tax Act 2017 (CGST).

On the other hand, respondents contended that the salaries paid by Huawei Technologies India Pvt. Ltd. to foreign national employees between 2018–19 and 2022–23 amounted to consideration for the “import of manpower recruitment and supply services” under the Goods and Services Act (GST).

Also pointed out that the expatriates were supplying services in India in the capacity of non‑resident taxable persons, thereby attracting liability under the Reverse Charge Mechanism.

The High Court held that the payments represented a direct employer–employee relationship, which is expressly excluded from GST under Entry 1 of Schedule III of the CGST Act, 2017.t further ruled that expatriates working in India could not be treated as “non‑resident taxable persons” and emphasized that, in light of CBIC Circular No. 210/4/2024‑GST, the taxable value of such transactions was deemed Nil since no invoices were raised.

The bench Justice S.R. Krishna Kumar, Referring to precedents such as Alstom Transport India Ltd. v. Commissioner of Commercial Taxes (2025) and Metal One Corporation v. Union of India (Delhi HC, 2024), the Court stated that salaries paid to expatriates under employment contracts cannot be treated as import of services

Accordingly, the writ petition was allowed, and the impugned notice was quashed.

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