Twenty US states, led by California, have filed a lawsuit against the Trump administration challenging its decision to impose a $100,000 fee on new H-1B visa applications, calling the move unlawful and economically damaging.

The legal battle has significant implications not only for US employers and public services but also for India, the largest source country for H-1B workers.

The H-1B visa programme allows US employers to hire highly skilled foreign professionals in sectors such as technology, healthcare, education, and scientific research. Indians account for a majority of H-1B recipients, particularly in information technology and engineering roles.

The contested fee was announced in September as part of the administration’s broader push to curb what it describes as over-reliance on foreign labour and to protect American jobs.

The policy requires employers to pay $100,000 upfront before a new H-1B petition is processed. Existing visa holders and renewals are reportedly exempt.

In their lawsuit, the states argue that the fee is far beyond what federal law permits. They contend that visa fees are meant to cover administrative costs, not to generate revenue or act as a deterrent.

By setting such a high amount, the administration is accused of overstepping its authority and bypassing Congress, which alone has the power to levy taxes or revenue-raising fees.

The states have also alleged violations of the Administrative Procedure Act, saying the policy was introduced without mandatory public consultation. Attorneys general from states including New York, Illinois, Massachusetts, and Washington have joined California in warning that the fee could severely disrupt public services.

Hospitals, universities, and public schools are among the largest users of the H-1B programme. The states argue that many public institutions will simply be unable to afford the fee, worsening staff shortages in healthcare, higher education, and research sectors already under strain.

For India, the lawsuit is being watched closely. Indian professionals dominate the H-1B pipeline, and US companies, particularly tech firms, rely heavily on Indian talent. A sharp reduction in new visas could limit opportunities for Indian graduates, engineers, and medical professionals seeking US employment.

India’s IT services industry could also feel the impact. Many firms depend on deploying skilled workers onsite in the US to service global clients. A steep visa fee may push companies to rethink hiring plans, expand offshore operations, or pass costs on to clients, affecting competitiveness and revenues.

Diplomatically, the issue has added friction to US-India economic discussions, with Indian industry bodies warning that the fee could disrupt families, discourage mobility, and weaken bilateral cooperation in technology and innovation.

The outcome of the lawsuit could determine whether the fee is blocked, revised, or upheld. Legal experts say a court ruling against the administration may force a rollback or require congressional approval, while a ruling in favour could fundamentally reshape skilled migration to the United States.