It was a matter of debate for a long time that whether activity of lending employees to other organisation was liable to service tax. The issue gained more complexity when the employees were lent at the actual cost to the lending company. Calculation of actual cost of employees is also not an easy task. It includes many types of payments to them.
This issue is now clarified by the given letter in case of ONGC and now all pending cases have to be dealt in same manner.
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.
In simple language following has been explained
The activity of ONGC of 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.
In the said definition the key words are, any person; directly or indirectly; in any manner; and temporarily or otherwise.
thus appears that organisations 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.
