Applicability of GST on Salary Reimbursement Component

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This query is : Resolved

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This discussion clarifies that GST is applicable on the full amount of salary reimbursement for outsourced manpower, not just the service charge. The manpower agency is considered the employer, and salary payments between two corporate entities are not exempt from GST. The agency should charge GST on the entire gross invoice value.

Rajendra Kumar Das

Rajendra Kumar Das (Querist)

29 September 2026 Dear Sir/Madam,
Our company has engaged a manpower service agency for providing outsourced manpower at various offices . The manpower service agency is the employer of the outsourced personnel, while our company is the principal employer.

The agency has submitted two separate tax invoices, as detailed below:

1. alary/Wages of outsourced personnel: An invoice towards the salary/wages paid to the outsourced employees, without charging GST.

2. Service Charges: A separate invoice towards service charges/agency charges at 10% of the salary component, on which GST @ 18% has been charged.

In this connection, your expert opinion is requested as to whether GST is required to be charged on the salary/wages component also, considering that the manpower agency is the actual employer of the outsourced personnel and the salary/wages are being paid by the agency.

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

29 September 2026 GST Applicability: GST @ 18% is applicable to the entire gross value (Salary/Wages + Service Charge) billed by the agency. Exemption Status: Salary is exempt from GST only between employee and employer; it cannot be treated as tax-free reimbursement between two corporate entities. Pure Agent Status: The agency does not qualify as a pure agent because paying worker salaries is its own primary obligation as the employer. Action Required: Request the agency to revise the billing structure and levy 18% GST on the total gross invoice value to avoid GST compliance issues and demand notices.

Rajendra Kumar Das

Rajendra Kumar Das (Querist)

29 September 2026 Thank you so much sir

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