69. MANPOWER RECRUITMENT OR SUPPLY AGENCY’S SERVICES
(A) Date of Introduction: w.e.f. 07.07.1997 (Notification No.23/97-S.T dated 02.07.1997)
(B) Definition and scope of service:
“Taxable Service” means any service provided or to be provided to any person, by a manpower
recruitment or supply agency in relation to the recruitment or supply of manpower, temporarily or
otherwise, in any manner;
[‘Explanation.—For the removal of doubts, it is hereby declared that for the
purposes of this sub-clause, 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]
*
[Section 65 (105) (k) of Finance Act, 1994 as amended]
“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];]
[Section 65(68) of Finance Act, 1994 as amended]
(C) Rate of Tax & Accounting Code:
Rate of Tax Accounting Code
Service Tax 10% of the value of services 00440060
Education Cess 2% of the service tax payable 00440298
Secondary and
Higher Education
cess
1% of the service tax
payable.
00440426
Other –
Penalty/interest
As levied or applicable 00440061
( Rate of tax is effective from 24.02.2009.)
( D ) Classification of Taxable Services:
(1) The classification of taxable services shall be determined according to
the terms of the sub-clauses (105) of section 65;
(2) When for any reason , a taxable service is prima facie, classifiable under two
or more sub-clauses of clause (105) of section 65, classification shall be
effected as follows :-
(a) the sub-clause which provides the most specific descripttion shall be preferred to subclauses providing a more general descripttion;
(b) composite services consisting of a combination of different services which cannot be
classified in the manner specified in clause (a), shall be classified as if they consisted of a
service which gives them their essential character, in so far as this criterion is applicable;
(c) when a service cannot be classified in the manner specified in clause (a) or clause (b), it
shall be classified under the sub-clause which occurs first among the sub-clauses which
equally merits consideration.
( Sec.65A of Finance Act,1994)
(E) Valuation of taxable services for charging Service tax
(1) Service tax chargeable on any taxable service with reference to its value shall,—
(i) in a case where the provision of service is for a consideration in money, be the gross amount
charged by the service provider for such service provided or to be provided by him;
(ii) in a case where the provision of service is for a consideration not wholly or partly consisting of
money, be such amount in money, with the addition of service tax charged, is equivalent to the
consideration;
(iii) in a case where the provision of service is for a consideration which is not ascertainable, be the
amount as may be determined in the prescribed manner.
(2) Where the gross amount charged by a service provider, for the service provided or to be provided is
inclusive of service tax payable, the value of such taxable service shall be such amount as, with the
addition of tax payable, is equal to the gross amount charged.
(3) The gross amount charged for the taxable service shall include any amount received towards the
taxable service before, during or after provision of such service.
(4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such
manner as may be prescribed.
Explanation.—For the purposes of this section,—
(a) “consideration” includes any amount that is payable for the taxable services provided or to be
provided;
(b) “money” includes any currency, cheque, promissory note, letter of credit, draft, pay order,
travellers cheque, money order, postal remittance and other similar instruments but does not include
currency that is held for its numismatic value;
(c) “gross amount charged” includes payment by cheque, credit card, deduction from account and
any form of payment by issue of credit notes or debit notes and ‘book adjustment, and any amount
credited or debited, as the case may be, to any account, whether called “Suspense account” or by any
other name, in the books of account of a person liable to pay service tax, where the transaction of
taxable service is with any associated enterprise.
( Sec.67 of Finance Act,1994)
Inclusion in or Exclusion from value of certain expenditure or cost:
(1) Where any expenditure or costs are incurred by the service provider in the course of providing
taxable service, all such expenditure or costs shall be treated as consideration for the taxable service
provided or to be provided and shall be included in the value for the purpose of charging service tax on
the said service.
[Rule 5(1) of Service Tax (Determination of Value) Rules,2006)]
(2) The expenditure or costs incurred by the service provider as a pure agent of the recipient of
service, shall be excluded from the value of the taxable service if all the following conditions are satisfied,
namely:- (i) the service provider acts as a pure agent of the recipient of service when he makes
payment to third party for the goods or services procured;
(ii) the recipient of service receives and uses the goods or services so procured by the service
provider in his capacity as pure agent of the recipient of service;
(iii) the recipient of service is liable to make payment to the third party;
(iv) the recipient of service authorizes the service provider to make payment on his behalf;
(v) the recipient of service knows that the goods and services for which payment has been
made by the service provider shall be provided by the third party;
(vi) the payment made by the service provider on behalf of the recipient of service has been
separately indicated in the invoice issued by the service provider to the recipient of
service;
(vii) the service provider recovers from the recipient of service only such amount as has been
paid by him to the third party; and
(viii) the goods or services procured by the service provider from the third party as a pure
agent of the recipient of service are in addition to the services he provides on his own
account.
[Rule 5(2) of Service Tax (Determination of Value) Rules,2006)]
(F) Clarifications issued by the Board:
(i) The Board vide Circular No.96/7/2007-ST dated 23.08.2007 on advertising agency services has
clarified the following issues-
010.01 /
23.08.07
Educational institutes such as IITs, IIMs
charge a fee from prospective employers
like corporate houses / MNCs, who come to
the institutes for recruiting candidates
through campus interviews. Whether
services provided by such institutions in
relation to recruitment of manpower are
liable to service tax under ‘manpower
recruitment or supply agency’ service
[section 65(105)(k)]?
‘Manpower recruitment or supply agency’ is
defined as “any person engaged in providing
any service, directly or indirectly, in any
manner for recruitment or supply of
manpower, temporarily or otherwise, to a
client” [section65(68)].
Educational institutes such as IITs and IIMs
fall within the definition of ‘manpower
recruitment or supply agency’, and service tax
is liable on services provided by such
institutions in relation to campus recruitment
under section 65(105)(k).
010.02 /
23.08.07
Business or industrial organisations engage
services of manpower recruitment or supply
agencies for temporary supply of manpower
which is engaged for a specified period or
for completion of particular projects or
tasks.
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. Employeremployee relationship in such case exists
between the agency and the individual and Whether service tax is liable on such
services under manpower recruitment or
supply agency’s service [section 65(105)(k)]
not between the individual and the person
who uses the services of the individual.
Such cases are covered within the scope of
the definition of the taxable service [section
65(105)(k)] and, since they act as supply
agency, they fall within the definition of
“manpower recruitment or supply agency”
[section 65(68)] and are liable to service tax.
(G) Exemption & Exclusion:
1. Exemption to Small Scale Service Providers:
In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994
(32 of 1994) (hereinafter referred to as the said Finance Act), the Central Government, on being satisfied
that it is necessary in the public interest so to do, hereby exempts taxable services of aggregate value not
exceeding Ten lakh* rupees in any financial year from the whole of the service tax leviable thereon under
section 66 of the said Finance Act:
Provided that nothing contained in this notification shall apply to,-
(i) taxable services provided by a person under a brand name or trade name,
whether registered or not, of another person; or
(ii) such value of taxable services in respect of which service tax shall be paid by such person and in
such manner as specified under sub-section (2) of section 68 of the said Finance Act read with
Service Tax Rules,1994.
2. The exemption contained in this notification shall apply subject to the following
conditions, namely:-
(i) the provider of taxable service has the option not to avail the exemption contained in this notification
and pay service tax on the taxable services provided by him and such option, once exercised in a
financial year, shall not be withdrawn during the remaining part of such financial year;
(ii) the provider of taxable service shall not avail the CENVAT credit of service tax paid on any input
services, under rule 3 or rule 13 of the CENVAT Credit Rules, 2004 (herein after referred to as the said
rules), used for providing the said taxable service, for which exemption from payment of service tax under
this notification is availed of;
(iii) the provider of taxable service shall not avail the CENVAT credit under rule 3 of the said rules, on
capital goods received in the premises of provider of such taxable service during the period in which the
service provider avails exemption from payment of service tax under this notification;
(iv) the provider of taxable service shall avail the CENVAT credit only on such inputs or input services
received, on or after the date on which the service provider starts paying service tax, and used for the
provision of taxable services for which service tax is payable;
(v) the provider of taxable service who starts availing exemption under this notification shall be required
to pay an amount equivalent to the CENVAT credit taken by him, if any, in respect of such inputs lying in
stock or in process on the date on which the provider of taxable service starts availing exemption under
this notification;
(vi) the balance of CENVAT credit lying unutilised in the account of the taxable service provider after
deducting the amount referred to in sub-paragraph (v), if any, shall not be utilised in terms of provision
under sub-rule (4) of rule 3 of the said rules and shall lapse on the day such service provider starts
availing the exemption under this notification;
(vii) where a taxable service provider provides one or more taxable services from one or more
premises, the exemption under this notification shall apply to the aggregate value of all such taxable
services and from all such premises and not separately for each
premises or each services; and
(viii) the aggregate value of taxable services rendered by a provider of taxable service from one or more
premises, does not exceed rupees *ten lakhs in the preceding financial year.
3. For the purposes of determining aggregate value not exceeding ten*lakh rupees, to avail exemption
under this notification, in relation to taxable service provided by a goods transport agency, the payment
received towards the gross amount charged by such goods transport agency under section 67 for which
the person liable for paying service tax is as specified under subsection (2) of section 68 of the said
Finance Act read with Service Tax Rules, 1994, shall not be taken into account.
Explanation.- For the purposes of this notification,-
(A) “brand name” or “trade name” means a brand name or a trade name, whether registered or not, that is
to say, a name or a mark, such as symbol, monogram, logo, label, signature, or invented word or
writing which is used in relation to such specified services for the purpose of indicating, or so as to
indicate a connection in the course of trade between such specified services and some person
using such name or mark with or without any indication of the identity of that person;
(B) “aggregate value not exceeding *ten lakh rupees means the sum total of first consecutive payments
received during a financial year towards the gross amount, as prescribed under section 67 of the
said Finance Act, charged by the service provider towards taxable services till the aggregate
amount of such payments is equal to ten lakh rupees but does not include payments received
towards such gross amount which are exempt from whole of service tax leviable thereon under
section 66 of the said Finance Act under any other notification.
4. This notification shall come into force on the 1st day of April, 2005.
[Notification No. 6/2005-ST, dated 1-3-2005. *Amended by Notfn.No. 8/2008-ST dated 01.03.2008]
2. Services to UN Agencies
Services provided to United Nations or an International Organizations are exempt.
[Notification No. 16/2002-ST, dated 2-8-2002]
3. Export of service: Any service which is taxable under clause 105 of Section 65 may be exported
without payment of service tax.
( Rule 4 of Export of Services Rules,2005)
4. Exemption to services provided to a developer of SEZ or a unit of SEZ:
Exempts the taxable services specified in clause (105) of section 65 of the said Finance Act, which are
provided in relation to the authorized operations in a Special Economic Zone, and received by a
developer or units of a Special Economic Zone, whether or not the said taxable services are provided
inside the Special Economic Zone, from the whole of the service tax leviable thereon under section 66 of
the said Finance Act subject to certain conditions. ( Refer notification for details)
{ Notification No. 09/2009ST dated 03.03.2009 (Prior to 03.03.2009 Notfn.No4/2004-ST dated
31.03.2004)}
5. Exemption to value of goods & material sold by service provider: In exercise of the powers
conferred by section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied
that it is necessary in the public interest so to do, hereby exempts so much of the value of all the taxable
services, as is equal to the value of goods and materials sold by the service provider to the recipient of
service, from the service tax leviable thereon under section (66) of the said Act, subject to condition that
there is documentary proof specifically indicating the value of the said goods and materials.
(Notification No. 12/2003-ST dated 20.06.2003 effective from 01.07.2003) 6. Exemption to taxable services provided by TBI and STEP: All taxable services, provided by a
Technology Business Incubator (TBI) or a Science and Technology Entrepreneurship Park (STEP)
recognized by the National Science and technology Entrepreneurship Development Board (NSTEDB) of
the Department of Science and Technology, Govt. of India from the whole of the service tax leviable
thereon subject tio certain conditions and procedures. ( Refer notification for details)
(Notification No.09/2007 ST dated 01.03.2007)
7. Exemption to taxable services provided by entrepreneurs located within the premises of TBI or
STEP: All taxable services, provided by an entrepreneur located within the premises of a Technology
Business Incubator (TBI) or a Science and Technology Entrepreneurship Park (STEP) recognized by the
National Science and technology Entrepreneurship Development Board (NSTEDB) of the Department of
Science and Technology, Govt. of India from the whole of the service tax leviable thereon subject to
certain conditions and procedures. ( Refer notification for details)
(Notification No.10/2007 ST dated 01.03.2007)
8. Exemption to services provided to Foreign Diplomatic Missions or Consular Post in India: All
services provided by any person, for the official use of a Foreign Diplomatic Mission or Consular Post in
India are exempted from service tax subject to certain conditions and procedures. (Refer notification for
details)
(Notification No. 33/2007-ST dated 23.05.2007)
9. Exemption to services provided for personal use of a family member of Diplomatic Agent or
Career Consular Officers posted in Foreign Diplomatic Mission/Consular Post in India: All
services provided by any person, for personal use of family member of Diplomatic Agents or Career
Consular officers posted in a Foreign Diplomatic Mission or Consular Post in India are exempted from
service tax subject to certain conditions and procedures. (Refer notification for details)
(Notification No. 34/2007-ST dated 23.05.2007)
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