Manpower supply, labour supply, housekeeping, security and recruitment/staffing services are taxable at 18% GST (SAC 9985). Critically, GST applies to the full invoice value — including the wages/salary reimbursed, not merely the agency's margin — unless a valid pure-agent arrangement exists. Security services (supply of security personnel) by a non-body-corporate to a registered person are under Reverse Charge (RCM) — the recipient pays. ITC is generally available to the recipient.
GST on Manpower & Recruitment — Decision Table
Every common manpower, staffing, security and recruitment scenario, with the GST rate, who pays, and whether Input Tax Credit is available.
| Type of Supply | SAC | GST Rate | Who Pays | ITC |
|---|---|---|---|---|
| Manpower / labour supply | 9985 | 18% | Agency (forward charge) | Yes |
| Housekeeping / cleaning staff supply | 9985 | 18% | Agency | Yes |
| Temporary / contract staffing | 9985 | 18% | Agency | Yes |
| Security services — non-corporate → registered person | 9985 | 18% | Recipient (RCM) | Yes |
| Security services — body corporate provider | 9985 | 18% | Provider (forward charge) | Yes |
| Recruitment / placement fee | 9983 | 18% | Agency | Yes |
| Executive search / headhunting | 9983 | 18% | Agency | Yes |
| Job portal subscription (Naukri, LinkedIn) | 9984 | 18% | Provider | Yes |
| Pure-agent reimbursements (Rule 33) | — | Excluded | — | — |
| Manpower to govt (Art 243G/243W functions) | 9985 | May be exempt | — | — |
SAC 9985 = "support services"; recruitment fees often classed under 9983. Rates were retained under the GST 2.0 two-slab structure effective 22 September 2025. Confirm on the official GST portal before invoicing.
GST Is on the Gross Value — Including Wages
For manpower and labour supply, the biggest error is charging GST only on the agency's service margin. Under Section 15 of the CGST Act, the taxable value is the full transaction value the agency bills to the client — so the reimbursed wages, salary, PF and ESI are all part of the value on which 18% GST is charged, unless a genuine pure-agent arrangement is in place.
A staffing agency that bills ₹10,00,000 (₹9,00,000 wages passed through + ₹1,00,000 margin) must charge 18% on the whole ₹10,00,000 — ₹1,80,000 GST — not just ₹18,000 on the margin. Charging GST on the margin alone is a common demand-notice trigger. The client, if registered, claims the full ₹1,80,000 as ITC, so the tax is usually cost-neutral for them — but the liability sits with the agency.
18% Manpower supply — full value
18% Recruitment fee — one-off
Recruitment/placement is billed as a one-off service fee, so 18% applies to that fee alone. But ongoing staffing/manpower supply passes wages through the invoice, so 18% applies to the gross — this distinction drives the tax difference.
Running a staffing or manpower agency? Get your invoicing and valuation reviewed.
Talk to a GST Expert →Security Services & the RCM Rule
Supply of security personnel is at 18% GST, but the payment mechanism depends on the provider. Since 1 January 2019, when a non-body-corporate (proprietor, partnership firm, individual) supplies security services to a registered person, the tax is payable by the recipient under RCM — the agency does not charge GST on the bill.
- Non-body-corporate → registered person: recipient pays 18% under RCM.
- Body-corporate provider (company / LLP): normal forward charge — the agency charges 18%.
- Recipients who are unregistered or in the composition scheme are outside this RCM entry.
- The client can generally claim ITC of the RCM GST paid, keeping it cost-neutral for taxable businesses.
The RCM entry covers security services specifically. Ordinary manpower, housekeeping and labour supply remain on forward charge — the agency charges and deposits the 18%. Do not extend the security RCM rule to all manpower contracts.
Hiring or running a security agency? Get your RCM position confirmed.
Check My RCM Position →Pure Agent — When Wages Can Be Excluded
A pure-agent arrangement under Rule 33 of the CGST Rules lets an agency exclude reimbursed wages from the taxable value — charging 18% only on its own margin. But the conditions are strict and rarely met by ordinary staffing contracts:
- A contractual agreement to act as pure agent of the recipient
- The agency makes the payment to the third party (worker) only as authorised
- Reimbursement is claimed at actual cost, separately shown on the invoice
- The service (wages) is in addition to the agency's own supply
- The agency does not hold title to, or use, what is procured for the recipient
In most staffing models the workers are the agency's own employees (agency is the employer of record, deducts TDS, pays PF/ESI). That defeats pure-agent status — so GST applies to the gross value. Genuine pure-agent treatment is the exception, not the norm.
ITC & Compliance Checklist
| Point | Requirement |
|---|---|
| Recipient ITC | Full ITC on manpower/recruitment GST — not blocked under Section 17(5) when used for business |
| Valid tax invoice | Supplier GSTIN, SAC, taxable value and GST shown separately; wages included in value unless pure agent |
| GSTR-2B match | Agency must file GSTR-1; credit must reflect in the client's GSTR-2B |
| Security RCM | Registered recipient self-pays 18% in GSTR-3B, then claims ITC |
| Employer-of-record duties | Agency handles worker TDS, PF, ESI and labour-law compliance |
| Proportionate reversal | Reverse ITC under Rule 42 if recipient has exempt supplies |
Unregistered small recruiters: no GST is charged and RCM does not apply to general recruitment — but the client then gets no ITC.
For a GST-registered client, 18% on manpower or recruitment is usually cost-neutral because full ITC is available. The real cash-flow risk sits with the agency: valuing GST on margin instead of gross value, or missing the security RCM split, are the two errors that trigger demand notices and interest.
Frequently Asked Questions
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