applicability of service tax on manpower outsourcing to municipal corporation

[Guest]

Sir,

We are engaging labour through man power outsourcing agency for our Municipal Corporation and we are paying Service Tax.Recently some one pointed out that Notification no 25/2012 - Service Tax exempts the following taxable services from the whole of the service tax leviable under section 66B of the said Act,

Service provided to Govt,a local authority or a govt authority by way of

carrying out any activity in relation to any function ordinarily entrusted to a municipality in relation to water supply, public health,sanitation conservancy,solid waste management .

kindly clarify whether municipality is exempted from service tax for engaging the labour through man power agency.

urs sincerely

chakravarthy.

[bhart b sharma]

the 'Manpower REcruitment or Supply Agency's Services' falling under Section 65(105)(k) of Finance Act, 1994 do not provide any exemption of this sort. besides, notif 25/12-ST dated 20.06.2012 does not contain any such exemption. as per my knowledge, contract labour employed by various government departments through a contractor are paying service tax. payment by govt. department is made after deducting service tax.

[Manoj Agarwal]

Dear Sir,

You are correct and the exemption referred by you is covered as per Entry 25(a) of Mega Exemption Notification No. 25/2012-ST, if the conditions are satisfied. So, depending on the terms of the contract and your status as 'local authority', your service provider can avail 100% exemption.

Regards,

Manoj Agarwal, Service Tax Consultant

[email protected] +91-9937041788

AI Summary

Service tax exemption on municipal functions may exempt outsourced manpower if conditions and local authority status are satisfied. Whether manpower-supply services to a municipal corporation are exempt hinges on classification and eligibility under the Mega Exemption Notification: services to a government or local authority relating to municipal functions can be exempt if the recipient qualifies as a local authority and the notification's conditions are satisfied, but manpower recruitment/supply services are a distinct taxable category and are not automatically covered without meeting those conditions.