Applicability of GST to an agent who is providing payroll service to the client

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This discussion clarifies the correct application of GST for payroll service providers. It explains that GST should only be charged on the service fees for processing payroll, not on the actual salaries being disbursed to employees. This is because salaries are considered a reimbursement to the client, with no profit margin involved.

Narasimhamurthy Krishnamurthy

Narasimhamurthy Krishnamurthy (Querist)

01 September 2021 Hi,

Please make me understand below,

We are providing Payroll services to a client and collecting GST @ 18% on both Salaries payable and on our Service charges. Is this correct?
Since our client will transfer salaries payable to our account and we will disburse the same to the employees who are in client place, so collecting GST on salaries is correct?
Please guide me further.

Thanks in advance
Narasimha Murthy. K

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

01 September 2021 GST applicable only on your service charges not on salaries.

Udaya Chandran

Udaya Chandran (Expert)

01 September 2021 As per my opinion, since the salaries are just reimbursement, paid on behalf of client and collected from the client, no profit element is found. So, GST is applicable only on the services rendered other than salary reimbursement.

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