Labour contractor and manpower supply services are taxed at 18% GST under SAC 9985 (support services), charged on the full invoice value — worker cost plus your margin. Security services supplied by a non-body-corporate to a registered body corporate attract 18% under Reverse Charge, so the recipient pays. Pure agricultural farm labour is exempt, and salary to your own employees is not a supply at all.
GST on Labour & Manpower — Decision Table
Every common labour, staffing and manpower scenario, with the rate, who pays and the applicable SAC code.
| Type of Supply | GST Rate | Charge | SAC |
|---|---|---|---|
| General labour / manpower supply | 18% | Forward charge | 9985 |
| Contract / temporary staffing | 18% | Forward charge | 998513/14 |
| Housekeeping & cleaning services | 18% | Forward charge | 9985 |
| Security services (agency is a body corporate) | 18% | Forward charge | 9985 |
| Security services (non-body-corp → body corporate) | 18% | RCM recipient | 9985 |
| Driver / cook / support staff supply | 18% | Forward charge | 9985 |
| Pure agricultural farm labour | Exempt | — | 9986 |
| Salary to own employees | Not a supply | — | — |
Labour and manpower are services under SAC 9985 at 18% — this rate was not changed by the GST 2.0 rationalisation effective 22 September 2025. Confirm on the official GST portal before invoicing.
Reverse Charge on Security Services
Security service (supply of security personnel) is the one manpower service under Reverse Charge. Under Notification 13/2017-CT(R), when a registered body corporate receives security services from any supplier other than a body corporate, the recipient — not the agency — pays 18% GST directly to the government.
RCM does not apply if the security agency is itself a body corporate (company/LLP) or if the recipient is unregistered or a composition dealer. General labour, housekeeping and staffing do not fall under RCM — they are ordinary forward-charge supplies at 18%.
Forward charge — agency bills GST
- General labour & manpower supply
- Contract / temporary staffing
- Housekeeping, cleaning, cook, driver
- Security when the agency is a body corporate
- Agency collects & deposits the 18%
Security to a body corporate
- Agency is NOT a body corporate
- Recipient is a registered company / LLP
- Recipient self-pays 18% under RCM
- Reported in GSTR-3B Table 3.1(d)
- ITC of the RCM tax is claimable
Companies engaging an unregistered or proprietor-run security agency often forget to self-pay RCM. The tax must be paid in cash (not from ITC), reported in GSTR-3B 3.1(d), and only then claimed back as ITC — skipping it invites interest and penalty on audit.
Engaging a security or manpower agency? Get your RCM & ITC position checked.
Talk to a GST Expert →Salary, Reimbursement or Taxable Supply?
Whether GST applies turns on the relationship. Salary to your own employees is outside GST (Schedule III — employer-employee is not a supply). But when you place workers with a client who directs their work, the entire billing — wages plus your margin — is a taxable manpower supply at 18%.
18% Manpower supply invoice
Own-employee salary
A "pure agent" reimbursement of exact wages can escape GST, but the conditions in Rule 33 are strict and rarely met by a labour contractor. In practice the safe position is to charge 18% on the total invoice; separating salary without airtight documentation is a frequent audit dispute.
Not sure if your billing model is GST-safe? Let us structure your invoices.
Get Manpower GST Advice →ITC You Can Claim & the 194C TDS
A registered labour contractor charging 18% can claim Input Tax Credit on genuine business inputs, subject to the blocked-credit rules in Section 17(5).
| Expense | ITC? | Reason |
|---|---|---|
| Office rent, software, professional fees | Yes | Used in the course of business |
| Advertising, mobile & internet | Yes | Ordinary business inputs |
| Work uniforms supplied to workers | Yes | Used for taxable supply |
| Personal car (< 13 seats) | No | Blocked — Section 17(5)(a) |
| Food, beverages, outdoor catering | No | Blocked — Section 17(5)(b) |
| RCM paid on inward security service | Yes | Claimable after cash payment |
PF and ESI contributions carry no GST, so no ITC arises on them.
- Section 194C TDS — the client deducts 1% (individual/HUF) or 2% (others) on payments to a contractor once a single bill exceeds ₹30,000 or the yearly aggregate exceeds ₹1 lakh.
- GST is charged on the value before income-tax TDS; the two are independent.
- The client may also deduct 2% GST-TDS under Section 51 if it is a government body or notified entity.
Labour Contractor GST Compliance Checklist
Registration is mandatory once aggregate turnover crosses ₹20 lakh (₹10 lakh in special-category states), and immediately for any inter-state supply of manpower regardless of turnover.
- GST registration (GSTIN)
- Correct SAC 9985 classification
- Tax invoice on full billing value
- RCM self-assessment on inward security
- GSTR-1 (outward supplies)
- GSTR-3B — including 3.1(d) RCM
- ITC reconciliation with GSTR-2B
- 194C TDS reconciliation
- PF / ESI compliance for workers
- E-invoicing (if turnover applies)
- GSTR-9 annual return
- Books & records upkeep
You must register if
- Aggregate turnover crosses ₹20 lakh (₹10 lakh special states)
- You supply manpower inter-state
- You supply through an e-commerce operator
- A client requires a GST invoice for ITC
Watch out for
- Forgetting RCM on unregistered security agencies
- Splitting salary to dodge GST without Rule 33 proof
- Claiming blocked ITC on cars, food or personal use
- Mismatching 194C TDS and GST turnover
The biggest labour-contractor errors are not rate errors — they are RCM omissions on security services and salary-splitting without documentation. Getting the invoice structure right upfront protects both you and your client from joint liability.
Frequently Asked Questions
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