Deputation of employees to group of company- reg.

[vinay wakde]

Ours is a public limited company. We have deputed some of our employees to our group company for a period of 4/5 months. Now we are raising debit note for collecting the Salary, remuneration, perquisites etc. of these employees. Whether the above service is falls under service category "Manpower supply service" or "Business support service"? Presently, we are service provider as well as service recipient. We do not have any agreement with the parent company that deputed employees sent for limited period on actual cost basis.

Regards,

VINAY

[PAWAN KUMAR]

Dear Sir,

As per my view, you need to charge service tax on such supplies of employee to your group company and for the purpose of the same, there should be a proper agreement between the two. If you have reqiestered under the category of Manpower supply/recruitment agency service, there is no issue. If you have not, ST-2 can be amended.

[KASTURI SETHI]

Sh.Vinay Wakde Ji,

Persons sent on deputation is manpower supply service. Your company has supplied manpower to your group of companies and received consideration. The employees were sent on deputation for a specific purpose so service tax is to be paid by your company. Non-execution of agreement with the parent company does not absolve of Service Tax liability. Since service has been provided and consideration has been received by way of debit notes, service tax has to be paid. Undoubtedly, Manpower Supply Service falls under Reverse Charge Mechanism, but employees were sent on deputation for a specific purpose, and specific period, so responsibility of deposit of Service Tax lies on your company who sent employees on deputation for a specific purpose.

I also agree with Sh.Pawan Kumar on this issue.

[vinay wakde]

Thanks for your valuable guidance.

Regards,

VINAY

[Ganeshan Kalyani]

Thanks for the information.

[YAGAY and SUN]

Dear All,

This is just for your kind information.

TMI ID= 245634 2014 (4) TMI 132 - GUJARAT HIGH COURT Other Citation: 2014 (35) S.T.R. 496 (Guj.)

Commissioner of Service Tax Versus Arvind Mills Ltd.

[KASTURI SETHI]

M/s.YAGAY AND SUN,

Thanks a lot for posting a relevant judgment the on this issue. Such case laws enrich our knowledge as these help in interpretation and analysis of law.

In this judgment of High Court, Order-in-Appeal No. 61/2007(STC)RAJU/Commr.(A-IV)/Ahd, dated 3-9-2007 mentioned in CESTAT judgement indicates that the period involved is old i.e. prior to the year 2007. Definition of 'Manpower Recruitment or Supply Agency' specified under erstwhile Section 65(68) and "Taxable Service" under Section 65(105)(k) was amended w.e.f. 16.5.2008. The words,'Any Commercial Concern' were substituted with 'Any Person' and the words, 'to a client' was substituted with 'to any person'. Thus situation has changed w.e.f. 16.5.2008 and further w.e.f. 1.7.12.

Moreover, I would like to emphasize that normally facts and circumstances of any case are not always the same. Your suggestion and advice always help me in my profession of consultancy.

With thanks & regards.

KASTURI LAL SETHI

 

[Ganeshan Kalyani]

Thanks for the information shared by the experts.

AI Summary

Manpower supply service: deputation to affiliated companies is taxable and supplier must account for service tax.
Deputation of employees to an affiliated company constitutes manpower supply service and is taxable even without a written agreement; the supplying company must account for service tax and, where necessary, amend its registration. While manpower supply is generally subject to the reverse charge mechanism, deputations for a specific purpose and period impose the primary tax deposit responsibility on the company supplying the employees.