Draft Circular on leviability of service tax on staff benefits and employment related transactions- reg .

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.... a company or by the employer to the employees.  These issues have been examined and are proposed to be clarified as follows: A.        Scope of manpower supply 2.         After the operationlisation of the Negative List, the erstwhile definition of the manpower recruitment or supply agency is no more applicable.  Thus, the words manpower supply would have to be given their natural meaning.  The manpower supply is understood to mean when one person provides another person with the use of one or more individuals who are contractually employed or otherwise engaged by the first person. The essence of the employment should be that the individuals sho....

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....ation, it shall not be a case of joint employment. 6.         Another arrangement could be where one entity pays the salary and other expenses of the staff on behalf of other joint employers which are later recouped from the other employers on an agreed basis on actuals.  Such recoveries will not be liable to service tax as it is merely a case of cost reimbursement.   C.        Directors 7.         Services of a director on the board of a company have now become taxable.  A director may be appointed either in an individual capacity or to represent an entity (including government) who has either invested ....

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....a portion of the salary foregone by the employee.  Such activities will also be considered as having been made for a consideration and thus liable to tax. Cenvat credit for inputs and input services used to provide such services will be eligible under extant rules. The said goods or services would now not be construed to be for personal use or consumption of an employee per se and rather shall be a constituent to the taxable service provided to an employee.  The status of the employee would be as a service recipient rather than as a mere employee when consuming such output service. The valuation of the service so provided by the employer to the employee shall be determined as per the extant rules in this regard. 10.  ....