Man Power Supply
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
17 April 2010
A compnay employed some employees in the name of other sister compnay and made a garee emnt with sister company that all recruitment will done by the company, all payment to employee will made directly made by the company and all statutory will also be paid by the compnay in nut shell only the employee will on the roll of sister compnay maintained by the company and per mont Rs.5000/- will be paid by the compnay to sister compnay for using their name on appointment of employees in the name of sister compnay but actually working for the comapnay.
Will servcie tax applied on Rs.5000/- per month payment or all the remunation paid to employee plus Rs.5000/- per month as agreed.
Will servcie tax applied on Rs.5000/- per month payment or all the remunation paid to employee plus Rs.5000/- per month as agreed.
17 April 2010
for supply of manpower, TDS u/s 194 C will be on the billed amount; i.e. Rs. 5000 in the present case
17 April 2010
Agreed...
Querist : Anonymous
Querist :
Anonymous
(Querist)
18 April 2010
Dear,
The question is related to service tax.
Please again go through from servicet ax point of view and confirm.
The question is related to service tax.
Please again go through from servicet ax point of view and confirm.
03 August 2024
In the context of service tax, the situation you've described involves a company (Company A) paying another company (Sister Company) a monthly fee for employing individuals on its behalf. Here’s a detailed breakdown of the service tax implications based on the scenario:
### **Scenario Recap:**
1. **Company A**:
- Conducts business operations and requires employees.
- Contracts with **Sister Company** to have employees “on the rolls” of Sister Company, while the actual work is performed for Company A.
- All payments, including salaries and statutory dues for employees, are managed by Company A.
- Company A pays Sister Company ₹5,000 per month as an arrangement fee.
2. **Sister Company**:
- Receives a monthly fee of ₹5,000 from Company A.
- Employees are technically on Sister Company’s payroll but work for Company A.
### **Service Tax Implications:**
1. **Nature of Service Provided:**
- **Manpower Supply Services:** If Sister Company is merely providing the name or the payroll administration for employees who are actually working for Company A, and not actively providing manpower for a service or project, this could be interpreted as a service arrangement rather than a straightforward manpower supply service.
- **Service Tax on the Arrangement Fee:** The ₹5,000 per month paid by Company A to Sister Company is essentially for the administrative or facilitation service provided by Sister Company in maintaining the employees on their payroll. This arrangement fee could be subject to service tax as it falls under the category of "Manpower Recruitment or Supply Agency Service."
2. **Service Tax Application:**
- **On the ₹5,000 Fee:** Service tax would generally apply to the ₹5,000 monthly fee paid to Sister Company, as this fee compensates for the service of maintaining the employees on Sister Company’s payroll. This should be treated as a service provided by Sister Company to Company A.
- **On Employee Remuneration:** The salaries and statutory payments made directly to employees by Company A are generally not subject to service tax. These payments are part of the employment arrangement and not considered a service.
### **Accounting for Service Tax:**
1. **Service Tax on ₹5,000 Fee:**
- **Company A:** Should account for service tax on the ₹5,000 per month payment to Sister Company.
- **Example Accounting Entry:**
- **Debit:** Service Expense (₹5,000 + Service Tax)
- **Credit:** Accounts Payable/Cash
- **Service Tax:** Paid as per applicable rates (e.g., 15% or as applicable at that time).
2. **No Service Tax on Salaries:**
- Salaries and statutory dues paid to employees are not subject to service tax.
### **Summary:**
- **Service Tax Applicability:** The ₹5,000 per month paid to Sister Company for maintaining the employees on their payroll is subject to service tax under "Manpower Recruitment or Supply Agency Service."
- **Salaries and Statutory Dues:** These are not subject to service tax, as they are part of the employment costs directly borne by Company A.
**Recommendation:**
- **Consultation:** For precise treatment and compliance, particularly with respect to evolving service tax rules or any specific nuances in your scenario, consult with a tax advisor or accountant. They can ensure accurate accounting and adherence to current regulations.
This ensures that both the arrangement and the actual employment costs are handled correctly from a service tax perspective.
### **Scenario Recap:**
1. **Company A**:
- Conducts business operations and requires employees.
- Contracts with **Sister Company** to have employees “on the rolls” of Sister Company, while the actual work is performed for Company A.
- All payments, including salaries and statutory dues for employees, are managed by Company A.
- Company A pays Sister Company ₹5,000 per month as an arrangement fee.
2. **Sister Company**:
- Receives a monthly fee of ₹5,000 from Company A.
- Employees are technically on Sister Company’s payroll but work for Company A.
### **Service Tax Implications:**
1. **Nature of Service Provided:**
- **Manpower Supply Services:** If Sister Company is merely providing the name or the payroll administration for employees who are actually working for Company A, and not actively providing manpower for a service or project, this could be interpreted as a service arrangement rather than a straightforward manpower supply service.
- **Service Tax on the Arrangement Fee:** The ₹5,000 per month paid by Company A to Sister Company is essentially for the administrative or facilitation service provided by Sister Company in maintaining the employees on their payroll. This arrangement fee could be subject to service tax as it falls under the category of "Manpower Recruitment or Supply Agency Service."
2. **Service Tax Application:**
- **On the ₹5,000 Fee:** Service tax would generally apply to the ₹5,000 monthly fee paid to Sister Company, as this fee compensates for the service of maintaining the employees on Sister Company’s payroll. This should be treated as a service provided by Sister Company to Company A.
- **On Employee Remuneration:** The salaries and statutory payments made directly to employees by Company A are generally not subject to service tax. These payments are part of the employment arrangement and not considered a service.
### **Accounting for Service Tax:**
1. **Service Tax on ₹5,000 Fee:**
- **Company A:** Should account for service tax on the ₹5,000 per month payment to Sister Company.
- **Example Accounting Entry:**
- **Debit:** Service Expense (₹5,000 + Service Tax)
- **Credit:** Accounts Payable/Cash
- **Service Tax:** Paid as per applicable rates (e.g., 15% or as applicable at that time).
2. **No Service Tax on Salaries:**
- Salaries and statutory dues paid to employees are not subject to service tax.
### **Summary:**
- **Service Tax Applicability:** The ₹5,000 per month paid to Sister Company for maintaining the employees on their payroll is subject to service tax under "Manpower Recruitment or Supply Agency Service."
- **Salaries and Statutory Dues:** These are not subject to service tax, as they are part of the employment costs directly borne by Company A.
**Recommendation:**
- **Consultation:** For precise treatment and compliance, particularly with respect to evolving service tax rules or any specific nuances in your scenario, consult with a tax advisor or accountant. They can ensure accurate accounting and adherence to current regulations.
This ensures that both the arrangement and the actual employment costs are handled correctly from a service tax perspective.
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