Applicability of Reverse charge mechanism on Manpower Recruitment services

[Tax DEPTT]

A Private limited company is registered under Service tax under the service category of ‘Manpower Recruitment Agency’ under section 65(105)(k). It is involved in providing placement services of personnel to various companies. It is not involved in  supplying any manpower like security/ labour or contractual personnel.

The company has certain empanelled  franchisees (non body corporate)  who provide the placement services  on behalf of the said company. The billing in respect of placement of manpower is done by the private limited company only and the franchisee raise the invoice on the said private limited company  in respect of their services.

After introduction of Reverse charge mechanism vide notification no. 30 dated 20/06/2012, I would request to clarify the following :

1. Whether the company would be covered under the reverse charge mechanism in respect of services provided or agreed to be provided by way of supply of manpower for any purpose or security services

1. If the reply to question no.1 is yes, then whether the invoices raised by the franchisees (non-body corporate) on the said private limited company in respect of services rendered by them  will be covered under reverse charge mechanism

[JAMES PG]

When the Pvt Ltd Co makes the payment to the franchisee towards manpower/security services, the said Co is liable to pay ST under reverse charge. The franchisee while billing have to charge 25% of the ST, if their turnover is above  Rs 10 lacs. Even if the turnover is below Rs 10 lacs, the Pvt Ltd Co is liable to discharge ST under reverse charge

[CASeetharaman KC]

The recruitment company i e the Private limited company can claim CENVAT credit / input credit for the amounts paid by it under the reverse charge mechanism and the amount invoiced by franchisees. Hence only balance amount need to be remitted to the government in cash after availing credit

AI Summary

Manpower Recruitment Agency Must Pay Service Tax Under Reverse Charge for Franchisee Services, Eligible for CENVAT Credit. A private limited company registered under the service category of 'Manpower Recruitment Agency' sought clarification on the applicability of the reverse charge mechanism introduced by notification no. 30 dated 20/06/2012. The company, which provides placement services through franchisees, inquired whether it is covered under the reverse charge mechanism for manpower or security services. Responses indicated that the company is liable to pay service tax under reverse charge when paying franchisees for these services. It can claim CENVAT credit for amounts paid under reverse charge and the invoiced amounts by franchisees, remitting only the balance to the government.