SPECIFIC SERVICES IN DETAIL

SPECIFIC SERVICES IN DETAIL

VIII.       Manpower recruitment or supply agency’s services

This service was introduced w.e.f. 7th July 1997.

Section 65(105) "taxable service" means any service provided or to be provided

(k)  to any person, by a manpower recruitment or supply agency in relation to the recruitment or supply of manpower, temporarily or otherwise, in any manner;

Explanation.—For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, recruitment or supply of manpower includes services in relation to pre-recruitment screening, verification of the credentials and antecedents of the candidate and authenticity of documents submitted by the candidate.

Section 65 (68)   "manpower recruitment or supply agency” means any person engaged in providing any service, directly or indirectly, in any manner for recruitment or supply of manpower, temporarily or otherwise, to any other person;

Clarification

Circular No.96/7/2007-ST, dated 23rd August, 2007

Issue

Educational institutes such as IITs, IIMs charge a fee from prospective employers like corporate houses / MNCs, who come to the institutes for recruiting candidates through campus interviews.  Whether services provided by such institutions in relation to recruitment of manpower are liable to service tax under ‘manpower recruitment or supply agency’ service [section 65(105)(k)]?

Clarification

Educational institutes such as IITs and IIMs fall within the definition of ‘manpower recruitment or supply agency’, and service tax is liable on services provided by such institutions in relation to campus recruitment under section 65(105)(k).

Issue

Business or industrial organisations engage services of manpower recruitment or supply agencies for temporary supply of manpower which is engaged for a specified period or for completion of particular projects or tasks. Whether service tax is liable on such services under manpower recruitment or supply agency’s service?

Clarification

In the case of supply of manpower, individuals are contractually employed by the manpower recruitment or supply agency. The agency agrees for use of the services of an individual, employed by him, to another person for a consideration. Employer-employee relationship in such case exists between the agency and the individual and not between the individual and the person who uses the services of the individual. Such cases are covered within the scope “manpower recruitment or supply agency” [section 65(68)] and are liable to service tax.

F.No.B1/ 6 /2005-TRU, Dated: July 27, 2005

Gem and Jewellery Export Promotion Council have represented seeking clarification that hiring of skilled artisans for making jewellery does not constitute supply of manpower taxable under “manpower recruitment services”. When the artisans are hired by any organisation or business, directly, without engaging the services of any other person in any manner, in such cases, the artisans are contractually employed by the company. There is no intermediary and hence no consideration is paid to or payable to any intermediary. The service tax would be leviable only when the services of a person are engaged for recruitment or supply of  artisans.

Exemption

Notification No.1/2009 – Service Tax, dated 5th January, 2009

Manpower recruitment or supply agency’s services provided to a goods transport agency have been exempted. Conditions for claiming this exemption are:

• Service provider should mention the name and address of the goods transport agency on the invoice issued by him; and
• Service provider should mention the name and date of the consignment note on the invoice issued by him

Valuation

F.No.B1/ 6 /2005-TRU, Dated : July 27, 2005

Service tax is to be charged on the full amount of consideration for the supply of manpower , whether  full-time or part-time. The value includes recovery of staff costs from the recipient e.g. salary and other contributions. Even if the salary is paid directly to the individual or the contributions are paid to the respective authority directly these amounts are still part of the consideration and hence form part of the gross amount.      

Question

X Ltd. contracts with Mr. A to supply unskilled labour @ Rs. 3500 p.m. 10 people for which service charges of Mr. A as agreed are Rs. 50000 p.a. During the year Mr. A supplies labour constantly. X Ltd is contract bound to pay the amount directly to Mr. A who will further pay its own labour.  Compute the service tax payable by Mr. A?

Answer

Particulars	Rs.
Labour charges	3500 x 10 x 12 = 420000
Service charges	50000
Total Value	470000
Service tax @ 10%	47000
Education cess @ 2%	940
Secondary and higher education cess @ 1%	470
Total invoice value	518410

Question

X Ltd. contracts with Mr. A to supply unskilled labour @ Rs. 3500 p.m. 10 people for which service charges of Mr. A as agreed are Rs. 50000 p.a. During the year Mr. A supplies labour constantly. X Ltd is contract bound to pay directly to labour and Rs. 50000 is to be paid in advance to Mr. A on yearly basis. Compute the service tax payable by Mr. A?

Answer

Particulars	Rs.
Labour charges	3500 x 10 x 12 = 420000
Service charges	50000
Total Value	470000
Service tax @ 10%	47000
Education cess @ 2%	940
Secondary and higher education cess @ 1%	470
Total invoice value	518410

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