Delhi HC Ruling on EY US Secondment Fees Raises Tax Costs for MNCs

Tax experts say the immediate cost impact is roughly 10% on the secondment payment, plus potential interest and penalties for past non-compliance. The broader effect is structural. Companies that used cost-plus or recharge models for expatriate staff may need to restructure those agreements, shifting from a reimbursement model to a service contract with proper withholding.

There is a second layer. If the payment is FTS, it may also attract Goods and Services Tax (GST) under the reverse charge mechanism, adding another 18% on top of the income tax. That would push the total incremental cost toward 30% for some arrangements, depending on the contract terms.

The ruling is not the final word. EY US can appeal to a division bench or the Supreme Court. Other multinationals are watching closely – a similar case involving another Big Four firm is pending before the same court. Until the law settles, the safe move is to treat secondment payments as FTS and withhold tax, or face the risk of a retrospective demand.

For now, the decision tightens the tax treatment of cross-border talent deployment in India. Companies that relied on the reimbursement argument will need to adjust their compliance posture or their contract structure.