Indian Service Tax
Manpower Recruitment Agency
Effective Date: 07/07/1997.
Authority: Notification No. 23/97-ST, dt. 02/07/1997 (for full text of Notification see under'Consulting Engineer').
Rate of Service Tax: 8% from 14/5/2003 (5% upto 13/5/2003). 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.
Definition: "manpower recruitment agency"means any commercial concern engaged in providing any service, directly or indirectly, in any manner for recruitment of manpower, to a client; [Section 65(68)]
Taxable service : Placement services by a man power recruitment agency in relation to the recruitment of manpower in any manner.
Value of taxable service: Gross amount charged by manpower recruitment agency from a client for recruitment of manpower services rendered in any manner.
Exemptions
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Renting out of premises to participants of trade fair and Election Commission - 2004 (164) ELT 163 (Tri-Del)
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Expenses reimbursed on actual basis
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Employment Exchanges
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Civil/electrical/labour contractors
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Educational & Professional institutions Person liable to pay: Manpower Recruitment Agency.
Head of Account
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Questions & Answers
Q.1 What is a " Manpower Recruitment Agency"?
Ans. A "Manpower recruitment agency "is any commercial concern engaged in provHing any service, directly or indirectly, in any manner for recruitmeilt of manpower, to a client.
Q.2 What is the Taxable Service in case of Man Power Recruitment Agency?
Ans. The taxable service rendered by a manpower recruitment agency is any service provided to a client, by a manpower recruitment agency in relation to the recruitment of manpower in any manner.
The coverage of the term "manpower recruitment agency" is wide and includes within its ambit, the services provided by an agency from the primary stage of building a database of manpower for different categories of personnel employment, determining manpower requirement for the client, preliminary identification, short-listing and screening of prospective candidates, providing specialists for interviewing prospective candidates, arranging for their interviews at each stage; placing advertisements for recruitment of manpower in the print or electronic media, etc. In short, Service Tax on manpower recruitment agency covers within its fold, the entire gamut of services provided by a man-power recruitment agency to a client from the initial stage of selecting/identifying man-power required for any prospective employment, till the stage of actual selection for the same.
Q.3 What is the value of Taxable Service in relation of ManPower Recruitment Agency?
Ans. The value of taxable service in relation to service provided by a Manpower recruitment agency to a client is the gross amount charged by such agency from a client in relation to the recruitment of manpower in any manner.
However, the expenses incurred by the manpower recruitment agency on behalf of the client which are reimbursed on actual basis are not includible in the value of taxable services. The manpower recruitment agency is required to substantiate such actual expenses on the basis of documentary evidence. In case the manpower recruitment agency is billing the client on the basis of a lump sum, any deductions from the same on account of reimbursable expenses, for the purposes of determining the value of taxable service may be permitted on the basis of documentary evidence adduced by the agency.
Q. 4. What is the procedure to be followed if the payment is received at different stages by the Manpower Recruitment Agency?
Ans. Normally the manpower recruitment agency receives remuneration from the client for the services rendered by it as per the stipulations in the contract/agreement. The payment from the client is received at different stages, based on the completion of work/service at each stage. The manpower recruitment agency shall be required to pay Service Tax on the payments received at each stage from the client by the 25th of the succeeding month. Subsequent modifications, if any, in the bills raised to the client at the time of final payment may be allowed after verification.
Q. 5 Whether the labour contractors, who supply their own labour on contract, would be covered under the definition of Manpower recruitment Agency?
Ans. No, since the labour contractors supply their own labour on contract, they do not help their client in recruitment of labour in any way. Therefore, the supply of labour on contract is not covered under the definition of Manpower recruitment Agency.
Q. 6 Whether 'trusts' providing the services of Manpower Recruitment Agency are liable to pay the Service Tax ?
Ans. Law as it stands now, does not provide any exemption to trusts from payment of Service Tax. If they are getting paid for providing the service, they are liable for payment of Service Tax on the amount, which, they have received from their client and are to be treated as any other .service provider.
Do academic institutions, recruiting their students for industrial establishments on receipt of payment, come under the category of manpower recruitment agency?
Q. 7 Do academic institutions, recruiting their students for industrial establishments on receipt of payment, come under the category of manpower recruitment agency?
Ans. Yes, the institutions which are performing the tasks of commercial concern assisting in Man power Recruitment, fall within the scope of the definition of term 'Manpower Recruitment Agency' and become liable to pay Service Tax.
Main text of Departmental Circular/TN
TN No. 53-CE (ST)/97, date: 04/07/1997 of New Delhi Commissionerate
3.1 As per Section 88 of the Finance Act, 1997 manpower recruitment agency means any commercial concern engaged in providing any service, directly or indirectly, in any manner for recruitment of manpower to a client. The taxable service rendered by a manpower recruitment agency is defined as any service provided to a client, by a manpower recruitment agency in relation to the recruitment of manpower in any manner. The rate of service tax is 5% and the value of taxable service in relation to service provided by a manpower recruitment agency to a client shall be the gross amount charged by such agency from the client in relation to the recruitment of manpower in any manner.
3.2 It would be pertinent to note that the coverage of the term manpower recruitment agency is wide and shall include within its ambit the services provided by an agency from the primary stage of building a database of manpower for different categories of personnel employment, whether white collar or blue collar, whether for employment in India or overseas; determining manpower requirement for the client, preliminary identification, short listing and screening of prospective candidates, providing specialists for interviewing prospective candidates, arranging' for their interviews at each stage; placing advertisements for recruitment of manpower in the print or electronic media etc. In short,
service tax on manpower recruitment agency shall cover within its fold the ptire gamut of services provided by a manpower recruitment agency to a client rom the incipient stage of selecting/identifying man-power required for any prospective employment, till the stage of actual selection for the same. It may !e noted that in certain cases such as where a person approaches a manpower ~quirement agency for being employed in a suitable position abroad, as normally lappens in case of employment in Gulf countries, the prospective candidate for employment become the client for purposes of service tax.
3.3 Service Tax on manpower recruitment agencies shall be the gross lmount charged to the client for services rendered in relation to the recruitment of manpower excluding the amount incurred by the manpower recruitment agency on behalf of the client towards expenses which are reimbursed on actual basis. The Commissioners may selectively, in doubtful cases require the manpower recruitment agency to substantiate such actual expenses on the basis of doumentary evidence. In case the manpower recruitment agency is billing the client on the basis of a lump sum, any deductions from the same on account of reimbursible expenses, for the purposes of determining the value of taxable service may be permitted on the basis of documentary evidence adduced by the agency.
3.4 Normally the manpower recruitment agency receives remuneration from the client for the services rendered by him as per the stipulations in the contract/agreement between them. The payment from the client is received at different stages, based on the completion of work/service at each stage. The manpower recruitment agency shall be required to pay service tax on the payments received at each stage from the client by the 15th of the succeeding month. Subsequent modifications, if any, in the bills raised to the client at the time of final payment may be allowed after verification.
Labour contractor - Exempted
Man Power Recruitment Agency's Service
Point No. 4.
Most of the manufacturers in the Trade are entrusting a work to a contractor to a mutually agreed amount to complete the work viz. loading of cargo, unloading of cargo, packing of finished goods etc. The contractor brings his own men on his account and completes the entrusted work by using his own labour. The labourer is no way connected to the Trade/Management and will not come in the pay roll of management. On completion of the entrusted work, the contractor receives the agreed amount from the management viz. Manufacturer/Trader.
Therefore, it is to be clarified whether the contract work taken by a contractor to a mutually agreed amount will fall under Man Power Recruitment Agency.
Reply
As per Section 65(68) of the Act, Man Power Recruitment Agency means any commercial concern engaged in providing any service, directly or indirectly, in any manner of recruitment of man power, to a client.
The DGST, Mumbai has clarified vide question and answers (2000-2001) No. 7.5 that the labour contractors, who supply their own labour on contract, would not be covered under the definition of Man Power Recruitment Agency. Since, the labour contractor supply their own labour on contract, they do not help their client in recruitment of labour in any way. Therefore, the supply of labour on contract is not covered under the definition of Man Power Recruitment Agency.
[Commissioner of Central Excise, Madurai-II, Minutes of the RAC meeting held on 29/8/2003].
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