Service Tax on Deputation of Personnel

Dear Professional Colleague,



It is always a matter of debate that activity related to lending certain employee to group or other organization is covered under service tax or not. This question become more relevant and important, when the cost is being recovered on actual basis without any profit margin or markup. Though there is no markup is again a question which cannot be answered easily, as determining actual cost of employee is not an easy job.



Now to clarify the situation, ONGC raised a query and to answer the same, it is clarified that irrespective any proposition, the activity to provide staff to associated/sister/related or to any other organization will be subject to service tax. For complete reference, we are attaching the letter issued by the department for your reference.



Hope the same will assist in your professional endeavor







With Warm Regards



Atul Kumar Gupta

B Com (Hons) FCA, AICWA, MIMA

Former Chairman NIRC of ICAI

Former Chairman NIRC of ICWAI

Author of “An Introduction to Service Tax”

Author of “Comprehensive Guide to Service Tax”



Mobile No. : 9810103611

Email : atul @ servicetax.net







SECTION 65(68) OF THE FINANCE ACT, 1994 - MANPOWER RECRUITMENT OR SUPPLY AGENCY'S SERVICES - APPLICABILITY OF SERVICE TAX ON DEPUTATION OF ONGC OFFICERS IN DIRECTORATE GENERAL OF HYDROCARBONS



LETTER [F. NO.137/35/2011 - SERVICE TAX], DATED 13-7-2011







Representation has been received seeking clarification on applicability of service tax under Manpower Recruitment and Supply Service in respect of employees sent on deputation by ONGC to Directorate General of Hydrocarbons (DGHC).



2. The matter has been examined and it is clarified that activity of ONGC for providing its staff on deputation to DGHC for a remuneration in the form of reimbursement from DGHC, is chargeable to service tax under 'Manpower Recruitment or Supply Agency's Service' in terms of section 65(105)(k) of the Finance Act. As per section 65(68) of the Finance Act, Manpower Recruitment or Supply Agency means any person engaged in providing any service, directly or indirectly, in any manner for recruitment or supply of manpower, temporarily or otherwise, to any other person.



3. In the said definition the key words are, any person; directly or indirectly; in any manner; and temporarily or otherwise. It thus appears that organizations that make available their staff to other entities would be covered under the said definition. The motive for providing such manpower is of no consequence. The requirement for taxability is that the person should be engaged in an activity that is covered under section 65(105)(k) ibid. The volume of activity undertaken or the presence or absence of the profit motive is irrelevant.



4. All pending issues may be decided accordingly.