Indian Service Tax
Manpower Recruitment Agency
Effective Date: 07/07/1997.
Authority: Notification No. 23/97-ST, dt. 02/07/1997 (for the full text of Notification, see under 'Consulting Engineer').
Rate of Service Tax: 8% from 14/5/2003 (5% up to 13/5/2003). 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.
Q. Whether the labor contractors, who supply their labor on contract, would be covered under the definition of Manpower recruitment Agency?
Ans. No, since the labor contractors supply their labor on contract, they do not help their client in the recruitment of labor in any way. Therefore, the supply of labor on contract is not covered under the definition of Manpower recruitment Agency.
Labor contractor - Exempted
Manpower Recruitment Agency's Service
Point No. 4.
Most of the manufacturers in the trade are entrusting work to a contractor for a mutually agreed amount to complete the work, such as 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 labor. The laborer is in no way connected to the trade/management and will not come on the payroll of management. Upon completion of the entrusted work, the contractor receives the agreed amount from the management, i.e., Manufacturer/Trader.
Therefore, it needs to be clarified whether the contract work taken by a contractor for a mutually agreed amount will fall under Manpower Recruitment Agency.
Reply
As per Section 65(68) of the Act, Manpower Recruitment Agency means any commercial concern engaged in providing any service, directly or indirectly, in any manner of recruitment of manpower to a client.
The DGST, Mumbai has clarified via questions and answers (2000-2001) No. 7.5 that the labor contractors, who supply their labor on contract, would not be covered under the definition of Manpower Recruitment Agency. Since the labor contractors supply their labor on contract, they do not help their client in the recruitment of labor in any way. Therefore, the supply of labor on contract is not covered under the definition of Manpower Recruitment Agency.
[Commissioner of Central Excise, Madurai-II, Minutes of the RAC meeting held on 29/8/2003].
Sir, according to this, we don't come under manpower recruitment agency, and hence we are not under service tax, right? Please, sir, help me in sorting out this confusion of service tax and also let me know if there are any new amendments regarding this. Also, is service tax applicable to a security agency that provides contract labor to a company but maintains their payroll, ESI, and PF, and monthly payment under the firm name, not through the company name? Does this attract service tax?