2.1. Definition:
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Supply of manpower
service: As per rule 2(g) of service tax rule,1994 , supply
of manpower means supply of manpower, temporarily or otherwise, to
another person to work under his superintendence or control.
2.2. Reverse
charge mechanism on supply of manpower:
As per notification 30/2012-ST dated 20.6.2012, In respect of services
provided or agreed to be provided of supply of manpower service, the liability
pay service tax would be as follows:
Taxable Service
|
Provided by
|
Provided to
|
Percentage of service
tax payable by the person providing service
|
Percentage of
service tax payable by the person receiving the service
|
services
provided by way of supply of manpower for any purpose
|
·
Individual
·
HUF
·
proprietary firm
·
partnership firm
·
AOP
|
·
Company
·
LLP
|
25%
|
75%
|
2.3. Activities
considered as supply of manpower service:
·
Services of providing employees of agency to business: As per CBEC circular no. 96/7/2007-ST dated 23-8-2007, 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 scope of supply of manpower
service.
·
Deputing officers from one company to other: As per CBEC circular no. 137/35/2011-ST dated 13-7-2011, activity
of company of providing its staff on deputation to other company for
remuneration in the form of reimbursement from other company, would be
chargeable to service tax under ‘supply of manpower service’.
·
Supply of manpower on man-hours basis: Future focus infotech v. CST (2010) 25 STT 373 (CESTAT), appellant had
supplied personnel to customers to work on their software projects and payment
has been received on basis of man-hours. It was held that this is manpower
supply service and is taxable.
·
Contract for execution of job: If a person undertakes to produce a given result for the establishment
through contract labour and labour works under control of contractor and
principal employer has no control over labour. In such case such service would
not be ‘supply of manpower’. However, if person supplies contract labour for
any work of establishment and labour works under control and supervision of
principal employer. In such case such service would be ‘supply of manpower’.
·
Payment on fixed rate basis for different type of work:
Divya enterprises v. CCE (2010) 25 STT 60 (CESTAT),
in contract of loading and unloading, payment is on the basis of rates fixed
for different type of work, then it would not be manpower supply service.
2.4. Clarification
by CBEC
As per CBEC circular no B-1/6/2005-TRU dated 27.7.2005 - 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.
2.5. Cenvat
credit
Sanghi Industries Ltd v. CCE, Rajkot (2009) 234 ELT 367 (Cestat,
Ahmedabad) – service tax paid on manpower supply to power plant and operation
and maintenance of power plant and where inputs and capital goods were used for
power plant set up by various manufactures for generating electricity to
provide excisable goods. Hence it was held that Cenvat credit would be
admissible on supply of manpower service.
2.6. Judgments
Harish Kumar
contractor v. CCE, Panchkula (2010) 17 STR 67 (Cestat, Delhi) – Labour provided to municipality is covered under supply of manpower.
Martial Security
and Detective services v. CCE, Meerut (2010) 17 STR 35 (Cestat, Delhi) – supply of bus conductors to state road transport corporation was
covered under supply of manpower.
CCE, Ahmadabad v.
Azur Cyber Pvt Ltd (2009) 20 STT 90 (Cestat, Ahmadabad) – assesse was engaged in providing manpower to various organization for
doing temporary work and assessee offered its staff for deputation at clients
place, it was held that service provided were actually manpower supply service
and not recruitment service.
K Domodar Reddy v.
CCE, Tirupathi (2010) 25 STT 69 (Cestat, Bangalore) – assesse was carrying out activities of loading of cement bags into
closed wagens, drawing of bags to stenciling floor etc. and it was compensated
for different items of works at separate rates prescribed in contract. Since it
did not supply manpower or charged for labour on man day or man hour basis and
he acted as a contractor employing his own labour. Hence such activity would
not be supply of manpower services.
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