Supply of manpower for work in India to foreign clients having no permanent establishment here will not be treated as export of services and accordingly attract GST, Uttar Pradesh’s Authority for Advance Ruling (UPAAR) has said.

The applicant, Noida-based Pacific Staffing Solutions sought advance ruling on its plans to provide manpower services. It plans to enter into agreements with various customers to provide Human Resource-related services, primarily, Manpower Supply services, to customers located outside India who do not have an establishment or presence in India.

These customers will be availing general staffing services, such as the supply of Contingent labor (Contractual resources) and FTE placements (Permanent resources) at various locations in India in their end- client offices/factories as per the requirement raised by their various Counterparts located in India or outside India.

Under the supply of contingent labor, the applicant will manage their complete payroll life cycle from Joining to Exit and will charge a fixed marked-up fee on the monthly payroll/CTC of contractual resources.

Likewise, a one - time fee will be charged for FTE (Full -time) placements. These services include supply of manpower to Corporate Client, tailor-made professional recruitment services, manpower management services, BPO services, Labor Dispatch Corporate Training and other related services as per the need of the customers.

“The applicant is liable to pay tax as it is not covered under the ambit of export of services,” UPAAR said in a recent ruling after hearing the arguments by CA Siddharth Kejriwal and his colleagues Prakash Joshi and Ashish Mittal on behalf of the applicant  

The quasi-judicial body also said that the place of supply of service shall be the location where the services are actually performed.

In the first case where the applicant is providing recruitment services, selected candidates are rendering their services in India.

In second case where applicant is providing Manpower Supply Services, the candidates are rendering services in India. Thus, in both the cases the services are actually being performed in India. This means these services can’t be termed as export of services.

It may be noted that AAR ruling is binding only on the applicant and jurisdictional tax officers. However, it can be relied upon in similar matter. Also, such ruling also become foundation for many policy changes.

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