GST on Manpower Services — Forward Charge or RCM?

No. The GST 2.0 rationalisation effective 22 September 2025 restructured goods and some services into a two-slab system, but manpower supply, staffing and labour contractor services remain at 18% under SAC 9985/9983. There has been no rate cut for these services.

The main codes are 998511 (executive/retained search and placement), 998512 (permanent placement/manpower supply), 998513 (contract staffing) and 998514 (temporary staffing). Payroll processing is 998311. All these carry 18% GST. Use the code that matches the exact nature of your service on the invoice.

Yes. A labour contractor who supplies workers to a factory (loading, packing, assembly, machine operation) makes a supply of service taxable at 18% under SAC 9985/998512. The factory can claim full ITC where the labour is used to manufacture taxable goods, the invoice is in the factory GSTIN and the credit appears in GSTR-2B. ITC is blocked only if the labour is used to construct immovable property.

RCM applies when a non-body-corporate supplier — a proprietor, partnership firm, HUF or individual — supplies manpower/security-type services to a GST-registered recipient, under Notification 13/2017-CT(R). The registered recipient then self-pays 18% GST directly to the government instead of the supplier collecting it. If the supplier is a company or LLP, it is forward charge and the agency collects the 18%.

The recipient. Under RCM the GST-registered business raises a self-invoice and deposits the 18% GST from its electronic cash ledger in GSTR-3B — it cannot pay RCM using ITC. The supplier bills without adding GST. The recipient can then claim the paid RCM back as ITC in the same period if the manpower is used for taxable business.

No. When the supplier is a body corporate — Private Limited, Public Limited, OPC or LLP — the transaction is under forward charge: the agency charges 18% on its invoice and deposits it. RCM is triggered only when the supplier is a proprietor, firm, HUF or individual. Always record the supplier entity type to fix the right mechanism.

No. RCM liability must always be discharged in cash from the electronic cash ledger; it cannot be set off against ITC. Once you have paid the RCM in cash and reported it in GSTR-3B, you may claim that same amount back as ITC in the same return, provided the manpower is used for taxable business and no Section 17(5) block applies.

Generally yes, under Section 16. Businesses can claim ITC on GST paid for staffing, recruitment and contract labour used in taxable operations — production, services, warehousing, housekeeping, security and admin. ITC is blocked under Section 17(5) when the manpower is used to construct immovable property, for personal consumption, or wholly for exempt supplies.

Section 17(5)(c)/(d) blocks ITC on goods and services — including manpower and works-contract labour — used for construction of an immovable property, even when it is for business. So a company that hires contract labour to build its own factory or warehouse cannot claim that ITC. Labour hired for machine maintenance or the production line, by contrast, is fully eligible. Keep the two sets of invoices in separate cost centres.

Yes. Manpower used to operate or maintain plant and machinery for taxable manufacturing is a normal input service and ITC is fully available, subject to a valid invoice, the credit showing in GSTR-2B and payment within 180 days. The block applies only to labour used to construct immovable property, not to production or maintenance labour.

A manpower agency supplies a service, so registration is mandatory once aggregate turnover crosses ₹20 lakh in a financial year (₹10 lakh in special-category states). Agencies making inter-state supplies, or supplying through an e-commerce operator, may need to register regardless of turnover.

Manpower supplied to an SEZ developer or unit is a zero-rated supply under Section 16 of the IGST Act. The agency can supply under a Letter of Undertaking (LUT) without charging GST, or pay 18% IGST and claim a refund. Most agencies use the LUT route to avoid blocking working capital, since refunds can take a couple of months.

For a manpower-supply contract, 18% GST is charged on the full contract value — including the wages, PF, ESI and the agency margin — because the agency is supplying the service of providing manpower. GST is limited to only the service fee/commission when the arrangement is a pure agent or a genuine reimbursement that meets the pure-agent conditions, which is rare for staffing contracts.

Yes. Payroll processing and HR-outsourcing services are taxable at 18% (SAC 998311) under forward charge, and the client can claim ITC where the service supports its taxable business. This is distinct from manpower supply — payroll processing is a back-office service and does not by itself involve placing workers under the client's supervision.

Security services (supply of security personnel) are taxed at 18%, and — like manpower — attract RCM when supplied by a non-body-corporate to a registered recipient. See our dedicated guide on GST on security services for the specific RCM notification and ITC treatment.