GST on Manpower, Recruitment & Staffing Services (2025–26)

Updated: 3 June 2026 | CGST Act 2017 · SAC 9983 / 9985

All recruitment, staffing, HR consulting, executive search, payroll processing, and background verification services attract 18% GST (SAC 9983/9985). GST-registered businesses can claim full ITC on recruitment fees. Reverse Charge Mechanism does not apply to recruitment services. Government recruitment bodies (UPSC, SSC) are exempt.

18%

GST rate on all recruitment and manpower services
Full ITC available for registered businesses · No RCM on recruitment · Government bodies exempt

GST Rates on HR and Recruitment Services: Service-wise Breakdown

Service	SAC Code	GST Rate	ITC Available?
Permanent placement / recruitment agency fee	9983	18%	Yes (for registered businesses)
Temporary / contract staffing services	9985	18%	Yes
Executive search / headhunting	9983	18%	Yes
HR consulting services	9983	18%	Yes
Payroll processing services	9983	18%	Yes
Background verification / screening	9983	18%	Yes
Labour contractor / supply of workers	9985	18%	Yes
HR outsourcing (third-party HR)	9983	18%	Yes
Job portal subscriptions (Naukri, LinkedIn, Indeed)	9984	18%	Yes
Recruitment platform API / ATS software	9983	18%	Yes
Government recruitment bodies (UPSC, SSC, state PSCs)	—	Exempt	N/A
Unregistered individual recruiter (freelancer)	9983	Nil (no GST charged; no RCM)	No

ITC on Recruitment Services: Conditions and Restrictions

Businesses can claim Input Tax Credit on GST paid to recruitment agencies subject to the following conditions:

Condition	Requirement
Recipient GST registration	The hiring company must be a registered GST taxpayer
Valid tax invoice	Invoice must show supplier GSTIN, SAC code, taxable value, and GST amount separately
GSTR-2B reflection	Supplier must file GSTR-1; credit must appear in hiring company's GSTR-2B
Business purpose	Recruitment must be in course or furtherance of taxable business activity
Not blocked under Section 17(5)	Recruitment is NOT a blocked credit item — full ITC is claimable
Proportionate ITC (if applicable)	If business has both taxable and exempt supplies, ITC must be proportionately reversed under Rule 42

Reverse Charge Mechanism (RCM): Does It Apply?

RCM does not apply on recruitment and placement services. Recruitment is not listed in the RCM notification under Section 9(3) of the CGST Act (which covers specific services like GTA, legal services from advocates, etc.). Section 9(4) RCM (unregistered suppliers) was largely withdrawn and currently applies only to specific notified categories — recruitment is not among them.

This means: if a company engages an unregistered recruiter, no GST is payable under RCM by either party. The downside is that the hiring company also cannot claim any ITC (as no GST invoice exists). For amounts involved, using a GST-registered recruitment firm is always advisable for compliance and ITC benefits.

GST on Job Portal Subscriptions

Platform	Service Type	GST Rate	ITC Claimable
Naukri.com (employer subscriptions)	Online job portal / database access	18%	Yes
LinkedIn Recruiter / Premium	Professional networking / recruiter tool	18%	Yes
Indeed (sponsored jobs)	Job advertising platform	18%	Yes
Monster / Shine (employer plans)	Online recruitment platform	18%	Yes
iimjobs / Hirist (niche portals)	Specialised job board	18%	Yes

Frequently Asked Questions

What is the GST rate on recruitment and placement services in India?

Recruitment and placement services are taxable at 18% GST in India. These services fall under SAC (Services Accounting Code) 9983 — "Other professional, technical and business services." This includes all forms of recruitment activity: permanent placement, temporary staffing, contract staffing, executive search and headhunting, talent acquisition consulting, and HR outsourcing. The 18% GST applies to the service charge/fee charged by the recruitment agency — not to the total salary of the placed candidate. For example, if a recruitment agency charges a fee of ₹1,00,000 for placing an executive, GST of ₹18,000 (18%) is applicable on the ₹1,00,000 fee. The employer/hiring company pays ₹1,18,000 in total. Importantly, if the hiring business is GST-registered, it can claim full Input Tax Credit (ITC) on this 18% GST paid to the recruitment agency, effectively making the GST cost-neutral for eligible businesses. Only unregistered businesses or exempt-sector entities cannot claim ITC.

Can businesses claim Input Tax Credit (ITC) on GST paid to recruitment agencies?

Yes, GST-registered businesses can claim full Input Tax Credit (ITC) on GST paid to recruitment agencies, provided certain conditions are met. The hiring company must be registered under GST. The recruitment service must be used in the course or furtherance of business (which it invariably is, since employees are hired for business purposes). The recruitment agency must have issued a valid GST invoice. The agency must have filed its GST returns (GSTR-1 and GSTR-3B) and the credit must reflect in the hiring company's GSTR-2B. A valid tax invoice with GSTIN of the agency, name and address of recipient, HSN/SAC code, and tax amount separately shown is mandatory. ITC is blocked under Section 17(5) for certain services (like food, club membership, health insurance), but recruitment/placement services are not blocked — full ITC is available. Companies in sectors exempt from GST (like education, healthcare providers) cannot claim ITC as they are not making taxable outward supplies.

Does Reverse Charge Mechanism (RCM) apply on recruitment services from unregistered agencies?

No, Reverse Charge Mechanism (RCM) does not apply on recruitment and placement services. Recruitment services are not listed in either Section 9(3) of the CGST Act (specific services under RCM) or Section 9(4) (supply from unregistered persons, which was suspended and later made applicable only for specific notified categories). Therefore, if an unregistered individual or small agency provides recruitment services to a registered business, no GST is payable by either party — since the supplier is unregistered and RCM does not apply to this category. However, this also means the hiring company cannot claim ITC (as no GST invoice is issued). Practically, large companies prefer using GST-registered recruitment agencies to ensure compliance, proper documentation, and ITC availability. If a corporate entity sets up an internal shared services centre and charges a management fee to group companies for HR/recruitment services, those intra-group charges would be taxable at 18% GST with ITC available.

What is the GST treatment for staffing and temporary workforce supply services?

Staffing services — where a manpower supply agency provides temporary workers or contractual staff to businesses — are taxable at 18% GST under SAC 9985. The staffing agency charges the client company for: (a) the gross salaries/wages of deployed workers, and (b) its service margin/markup (management fee). GST at 18% applies on the total amount billed by the staffing agency to the client — including both the salary component passed through and the agency margin. The client company can claim full ITC on the 18% GST if it is GST-registered and uses the staffing service for taxable business activities. A critical compliance point: the staffing agency is responsible for deducting TDS and filing TDS returns for the deployed workers (they are the employer of record). The client company should not deduct TDS on salary unless workers are directly on its payroll. The agency must also comply with PF, ESI, and other labour law requirements for deployed workers. Monthly GST invoices from the staffing agency serve as the basis for ITC claims.

Are government recruitment agencies like UPSC and SSC exempt from GST?

Yes, recruitment services provided by the government and certain government bodies are exempt from GST. Services provided by the central government, state government, union territories, or local authorities to individuals — including recruitment, examination, and selection services — are generally exempt under GST. Constitutional bodies like UPSC (Union Public Service Commission), SSC (Staff Selection Commission), state public service commissions, and similar bodies conducting examinations for government employment are classified as government services and are exempt from GST. Application fees, examination fees, and related charges collected by these bodies do not attract GST. Similarly, services provided by a governmental authority or government entity in the discharge of their statutory functions are exempt. Private companies providing recruitment services to government departments are, however, taxable at 18% GST — only the government body's own services are exempt, not those of private contractors working for government entities.

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