GST on Labour Contractor & Manpower Supply — 18% or RCM?

Manpower supply is charged at 18% GST under SAC 9985, with sub-codes such as 998513 (contract staffing) and 998514 (temporary staffing). There is no lower slab for manpower — whether the workers are skilled, semi-skilled or unskilled, the supply of manpower to a client who directs their work is taxed at 18%.

The primary SAC for labour and manpower supply is 9985 (support services). Specific sub-codes include 998513 for contract staffing, 998514 for temporary staffing and 998519 for other employment and labour supply. All of them carry 18% GST.

It is 18% for pure labour and manpower supply under SAC 9985. There is no 12% rate for supplying manpower. A 12% or 5% rate can apply only to a works contract or a composite supply of goods plus labour (for example certain construction works), which is a different classification from pure labour supply.

It depends on the security agency. If the agency is a body corporate (company or LLP), it charges 18% GST on its invoice under forward charge. If the agency is not a body corporate — a proprietor or partnership — and the recipient is a registered body corporate, the recipient pays 18% GST under Reverse Charge and the agency does not charge it. The recipient reports this in GSTR-3B Table 3.1(d).

No. Reverse Charge applies only to security services (supply of security personnel), not to general manpower, housekeeping, cleaning or staffing. Those are ordinary forward-charge supplies where the agency charges 18% GST on its invoice. Only security personnel supplied by a non-body-corporate to a registered body corporate falls under RCM.

Yes. When you pay 18% GST under RCM on inward security services, you can claim it back as Input Tax Credit in the same period, provided the service is used for your business. The catch is that the RCM tax must first be paid in cash (it cannot be set off against existing ITC) and reported in GSTR-3B 3.1(d) before the credit is taken.

RCM turns on whether the agency is a body corporate, not merely on registration. If the agency is a company or LLP it charges GST under forward charge even though it is registered. RCM applies when the agency is a proprietor or partnership (non-body-corporate) supplying to a registered body corporate. A registered proprietor agency to a company still triggers RCM on the recipient.

Yes. A registered labour contractor charging 18% can claim ITC on office rent, software, professional fees, advertising, mobile/internet and uniforms supplied to workers, since these are used in the course of business. ITC is blocked under Section 17(5) on personal cars under 13 seats, and on food, beverages and outdoor catering. Net GST payable is the 18% charged to clients minus eligible ITC.

Under Section 194C of the Income-tax Act, the client deducts TDS at 1% (individual/HUF contractor) or 2% (others) on payments to a labour contractor once a single payment exceeds ₹30,000 or the yearly aggregate exceeds ₹1 lakh. This income-tax TDS is separate from GST — GST is charged on the value before TDS is deducted.

In practice, yes. When you supply manpower to a client, GST at 18% applies to the whole invoice — wages plus margin — because it is a single manpower service. A pure-agent reimbursement of exact wages can escape GST, but the Rule 33 conditions are strict and rarely met, so the safe position is to charge 18% on the total and not split the salary line.

No. Salary paid to your own employees is not a supply under GST — the employer-employee relationship is excluded by Schedule III of the CGST Act. GST arises only when you supply those workers to a third-party client as a manpower service, in which case 18% applies to the billing, not to the salary paid internally.

No. Statutory PF (employer 12%) and ESI (employer 3.25%) contributions are not a supply and carry no GST, whether you pay them for your own staff or for contract workers. Consequently no ITC arises on them. Only the manpower service you bill to the client is taxable at 18%.

Pure agricultural labour supplied for farm operations (cultivation, harvesting, related farm work) is exempt under the agricultural exemption, classified under SAC 9986. The exemption is specific to genuine agricultural operations — general labour hired by an agri-business for non-farm activities such as processing or packing is taxed at 18%.

Generally yes, at 18%. Supplying manpower to a government department is a taxable service and does not enjoy a blanket exemption. A narrow exemption exists for certain pure services (no goods element) provided to government in relation to functions entrusted to a Panchayat or Municipality, but ordinary labour or security supply to government is taxed at 18%.

Registration is mandatory once aggregate turnover crosses ₹20 lakh in a financial year (₹10 lakh in special-category states). It is also mandatory, regardless of turnover, if you make any inter-state supply of manpower or supply through an e-commerce operator. Many contractors also register voluntarily so clients can claim ITC on their invoices.

In contract staffing the contractor supplies workers and the client directs them; GST at 18% applies to the full billing (wages plus margin). A PEO or payroll-processing model, if structured as a salary passthrough plus a management fee, is generally charged 18% on the management fee only. The structure decides the taxable value, so documentation must clearly reflect it.