Manpower Supply Service or Security Service under Service Tax

Definition:- Manpower supply means supply of manpower , temporarily or otherwise, to another person to work under his superintendence or control. (Rule 2(g) of service tax rules)

Service Tax:-  

1.     As per the Notification No. 30/2012-Service Tax dated 20th June 2012, reverse charge mechanism of service tax has become applicable on manpower service (S. No. 8) w.e.f. 1^st July 2012. Under this scheme, the service tax was payable under partial reverse charge mechanism i.e 75% by service receiver and 25% by service provider but after budget, 2015 w.e.f. 01^st April, 2015 the 100% service tax is payable by service receiver under full reverse mechanism (Notification no. 7/2015-ST dated 1^st March, 2015)

The reverse charge is applicable if service receiver and service provider satisfy the following conditions:-

a)    Service Provider - Individual (proprietor), or partnership firm (registered or unregistered) or an HUF.

b)    Service Receiver - Any company formed or registered under the Companies Act, 1956 or a business entity registered as body corporate located in the taxable territory.

2.      As per Notification no. 33/2012-St dt. 20-06-2012 no threshold exemption of Rs. 10 lacs is available to Service Receiver as this exemption is  available to Service Providers only.

3.     The service receiver has to register himself under service tax if he is already register then is has to add all the specific services in the registration certificate (ST-2)   

Reverse Charge not apply in the following cases:- 

1.     Supply of labour without superintendence and control of receiver shall be not categorized under “Supply of Manpower” and consequently it cannot fall within the ambit of reverse charge envisaged in the notification 30/2012-ST and the service provider would be liable to pay service tax.

2.      If service receiver is located in non taxable territory or charity or non profit organization, government in the case reverse charge mechanism will not apply.

3.       If service receiver is Individual, HUF, Partnership Firm, Proprietary Firm or AOP

4.       If Service Provider is a Company

Activities Consider as manpower Service:-

1.       Cleaning service, piece basis/job basis contract is not manpower service

2.       Employees sent for deputation from one company to another covered under manpower supply service

3.       Supply of manpower on man-hour basis

4.       Labour supply for execution of job and under control of principal employer

5.    Work carried out on lump sum basis as a contractor, does not eligible to Service Tax under the Supply of Manpower Services - M/s. Shri Bileshwar Khand Udyog Sahakari Mandali Limited Vs. CCE [(2013) (Ahmedabad – CESTAT)

TDS:- Vide Circular no 1/2014 dated 13^th January, 2014, TDS should be deducted on amount of service and not on service tax collected if service tax amount has been shown separately in invoice, otherwise TDS should be deducted on whole amount including service tax.

Cenvat Credit:- 

1.    This service tax liability has to be paid in cash. No Cenvat Credit can be utilized to meet out this liability as Cenvat Credit facility is available for output services only

2.     In case of Input Service where service tax is paid under reverse charge by service recipient, the CENVAT credit in respect of such input service shall be allowed after payment through GAR-7 challan

3.    If service provider has paid some portion of service tax then service receiver can claim Cenvat on input services

4.    The service tax shall be paid by service tax receiver only after making payment of services to the service provider within 6 months.

5.      If full service tax is paid by the service provider then service receiver is not required to pay the service tax to avoid double taxation as per judgement in case of Liason Breweries vs CCE and CCE vs Om tea Company

6.     In case of Service Providers rendering the services all of which falls within the ambit of complete reverse charge mechanism then he cannot avail Cenvat credit of input or input services.

Refund of Cenvat Credit:-

If service provider is not able to utilise cenvat credit against its output service then he cannot claim refund of Cenvat. There are two exception to this rule;

(a) Export of service (Rule 5A of CCR, 2004)

(b) A service provider also discharging ST liability under section 68(2), is unable to utilise such Cenvat credit against his ST liability on output services, refund is admissible as per Rule 5B of CCR, 2004 as amended by NN 28/2012-CE (NT) dt 20-06-2012 but CBEC has not notified its claiming procedure so far so practically it can’t be claimed till date. It is pertinent to mention here that Rule 5B does not cover refund of Cenvat credit availed on capital goods.