In a recent ruling, the Uttar Pradesh Authority for Advance Ruling (UPAAR) stated that the supply of manpower for work in India to foreign clients, who have no permanent establishment in the country, will not be treated as an export of services and will therefore be subject to Goods and Services Tax (GST). The ruling came in response to an application filed by Noida-based Pacific Staffing Solutions.
Pacific Staffing Solutions sought clarity on its plan to provide manpower services to foreign clients. The company intended to supply general staffing services, including contingent labour (contractual resources) and FTE placements (permanent resources), for clients who do not have a presence in India. The services would be rendered at various locations in India, including end-client offices or factories, as per the client's requirements.
The company's services include managing the payroll life cycle from joining to exit for contingent labour, charging a fixed markup fee on the monthly payroll/CTC, and a one-time fee for FTE placements. Other services offered include corporate recruitment, manpower management, BPO services, and corporate training.
UPAAR ruled that since the manpower services are provided in India and performed within Indian territory, they cannot be classified as export of services. The quasi-judicial body emphasized that the place of supply is where the services are performed-India-making the applicant liable to pay GST.
The applicant was represented by CA Siddharth Kejriwal along with Prakash Joshi and Ashish Mittal, who argued that the services should be considered export of services as the clients are located outside India. However, UPAAR concluded that since the candidates and manpower are deployed within India, the services do not qualify as exports.
It is important to note that rulings by the Authority for Advance Ruling (AAR) are binding only on the applicant and the jurisdictional tax officers involved, but they can serve as precedents in similar cases and influence broader policy decisions.
This ruling could have significant implications for companies providing staffing and recruitment services to foreign clients in India, clarifying the tax treatment of such transactions under GST law.
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