CA Abhishek Chopra

CA Abhishek Chopra

Applicability of reverse charge mechanism: Supply of Manpower Vis-à-vis Recruitment of Manpower

Prior to the introduction of negative list under Service tax, which came to effect from 01st July, 2012, service tax was levied on “Manpower Recruitment or Supply Agency services”, under section 65(105)(k) of the Finance Act, 1994. Section 65(105) (k) defined “manpower recruitment or supply agency services” as below:

“taxable service means any service provided or to be provided

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

It can be deduced from the above that supply of manpower as well as recruitment of manpower was covered under the ambit of same definition.

Post introduction of negative list, which became effective from 01st July, 2012, scope of Reverse Charge Mechanism (RCM) was widened vide Notification no. 30/2012-ST dated 20th June, 2012. Under said Notification, entry no. 8 deals with the applicability of reverse charge to supply of manpower, the partial reverse charge mechanism is applicable, inter alia, to services provided or agreed to be provided by way of supply of manpower for any purpose, by any individual, Hindu Undivided Family or partnership firm, whether registered or not, including association of persons, located in the taxable territory to a business entity registered as a body corporate located in the taxable territory. The said entry was amended vide Notification no. 7/2015-ST dated 01st April, 2015 and supply of manpower services were brought under full RCM.

Further recruitment of manpower is not the Supply of manpower, recruitment is altogether different from supply of manpower. On the basis of above information it can be assumed that only supply of manpower is covered under RCM and no reference regarding recruitment of manpower services is made for purposes of RCM.

(Author can be reached atabhishekrchopra@gmail.com)

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26 responses to “RCM on Manpower Supply Vis-à-vis Manpower Recruitment”

  1. m v ramana says:

    Kindly clarify about Service Tax applicability on:
    1. manpower engagaed by our company directly with out subcontractor to complete the some work for one or two days is applicable rcm or not.

  2. DIPIKA says:

    When independent Labour contractor is assigned work of Boring at site. the work may be carried out by Labour contractor himself or with the help of other labourers, then whether such service is covered under supply of Manpower or not ?

    Please help on above issue.

  3. SJ says:

    Please clarify whether RCM is applicable on manpower recruitment agency

  4. SANJAY KR TEWARI says:

    Sir,
    Can You guide me on reverse charge liability rate of service tax against bill raised for the services Apr`15 and bill was raised on 01.05.2015 with levy of service tax rate 12.36% but toady my portion of liability will be the same @12.36% (i.e. 50% of total liability) or it will be @14%?

    Regards,
    Sanjay K Tewari

  5. Navas .B says:

    Sir,

    Kindly give Latest amendment regarding service tax %(Percentage) of Service receiver for service contract (AMC) in case the service providing by a Ltd Company.

  6. naveen says:

    hello sir,
    Plz tell either the responsibility of tax submission (deposit) is with service provider or service reciever ? In case where the 100% tax is being paid by the service reciever.

  7. vinod malviya says:

    sir.
    we are service received in legal consulting service , manpower recruitment / supply agency services , rent a cab scheme operator and work contractor.
    Pls. tell me sir, how is the calculation of reverse charges and how many place in effect.

  8. Kuldeep Khanna says:

    Sir Please tell me who is liable to pay service tax in case of manpower either service provider or service received and both are Individual. and what shall be the rate of Service Tax.

  9. Yajamanam says:

    Ours is US based co. having Liaison office in india. We are receiving manpower supply services fm a ownership co. (Not Pvt Ltd). What will be the ST liability under RCM in getting services fm this party?
    What would be the advantage if we get same services fm a Pvt Ltd. Co. ?

  10. KAILSJH says:

    IF A PERSON PAYS FEES TO AN ADVOCATE AMT TO RS10000/-
    HOW HE CAN PAY SERVICE TAX UNDER THE REVERSE CHARGE REGIME WITHOUT GETTING HIMSELF
    REGISTERED UNDER THE SEWRVICE TAX ACT.HE HAS ONLY ONE TRANSACTION IN WHOLE OF THE
    F.Y.

  11. Subhash says:

    Dear Sai Teja ,

    Section 65 Clause(68) of Finance Act.1994 “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.

    Explanation. to Section 65 Clause 105 of Finance Act.1994

    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.

    In brief ,we can say, that A recruitment services would be finished ,when he recruit any person for a particular Job/Post and receive consideration from company for whom such person recruited or any other person to whom service provided .For Example “Placement Agency”.
    But in case of man power supply service is “Security Agency Service”.
    In some cases both the services provided by same person than RCM will be applicable according to nature of services received by recipient.
    I hope you get best answer ……Thanks

  12. Dhavabalan says:

    Dear All,

    I Want to know Due month for Reverse Charge Mechanism..?

    Illustration:- I am a Service Receiver, If i have Receive Manpower Service in May month and i will make a Payment to Vendor is June in this case when i have to pay???

  13. manikanta says:

    Thanks,if labour supplied by outsider it is called supply of man power and if company directly recruits person it is called recruitment of manpower am I right?

  14. nayan shethna says:

    i presume that as discussed above, manpower recruitment agency, who only finds the candidate for the company, has not to charge service tax but the same will be paid by the recipient. am i right?

  15. Prakash Biswas says:

    Is Reverse Charge Mechanism is a compulsory or optional for the service recipient if the service recipient is an Pvt. Ltd Company.

  16. CA Abhishek Chopra says:

    Dear Sir,
    The word “supply” and Recruitment” is not defined in the Act, hence we need to understand the same in terms of general trade practice.So, if a service provider has employees on his payroll and he pays salary, PF, ESIC etc for such employee and he supply such manpower to service receiver for temporary or otherwise, under his superintendence and control then it can be said to be the supply of manpower.
    However if a service receiver needs some candidate/employee and service provider assist him in screening, shortlisting, selecting the desired candidate as per the requirement of service receiver then this can be said to the recruitment.

  17. CA Abhishek Chopra says:

    Dear Sir,
    The word “supply” and Recruitment” is not defined in the Act, hence we need to understand the same in terms of general trade practice.So, if a service provider has employees on his payroll and he pays salary, PF, ESIC etc for such employee and he supply such manpower to service receiver for temporary or otherwise, under his superintendence and control then it can be said to be the supply of manpower.

    However if a service receiver needs some candidate/employee and service provider assist him in screening, shortlisting, selecting the desired candidate as per the requirement of service receiver then this can be said to the recruitment.

  18. Srinivas says:

    Supply of manpower is a situation where business is of providing contract labor, e.g. X & Co recruits Mr.A on rolls & deputes him to Y Ltd. Here reverse charge will come into force.

    Manpower recruitment: X & co (continuing the example) is in a business of finding a right candidate for an opening in Y Ltd.

    These are quite known forms of business models where there could not be much scope for confusions.

  19. Harvinder says:

    When the Act states that supply of manpower for any purpose directly or indirectly than it is very difficult to distinguish.

  20. CA. Sanjay Gupta says:

    Kindly clarify about Service Tax applicability on :
    1. manpower supply TO Municipal Committee (i.e. a local authority with exempt income)
    2. Renting BY Local Authority of Immovable property
    3. Sale of space BY Local Authority for advertisement

  21. thambi says:

    Thanks the activities of both services to be reveled so that the clarity of definition will be clear

  22. Harikrishna says:

    Thanks,Could you please distinguish clearly difference between Recruitment and supply of Man power

  23. Rana says:

    I want to know if any Govt Organization under Ministry of Defence or Ministry of Finance receives manpower supply , whether it will come under RCM ?

  24. Bharat Anand says:

    Whether supply of manpower by pvt Ltd co is covered under RCM?

  25. nagaraja n says:

    True. I tend to agree with the author. Only in respect of supply of man power, RCM will apply and not in case of recruitment service.

  26. Sai Teja says:

    Thank you.But i want to know the difference between Recruitment & Supply of Man power. Because according to above information supply of man power service is under full Reverse charge mechanism.

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